* LSE’s Turquoise to start April 23, NYSE Arca in Q2
* LSE uses Turquoise arm for strategic moves
* Clearing house EuroCCP and parent DTCC enable initiatives
* EuroCCP eyes greater business via low US post-trade costs
(Adds announcement by NYSE Arca, EuroCCP comment, details)
By Jane Baird
LONDON, April 14 (Reuters) - Rivals London Stock Exchange (LSE.L) and NYSE Euronext NYX.N are both launching trading in U.S. equities during European hours on affiliate platforms in a move to boost transatlantic trading.
Clearing house EuroCCP and its parent company, the U.S. monopoly clearing and settlement firm Depository Trust and Clearing Corp (DTCC), are enabling the moves by offering low post-trade costs for U.S. securities.
The initiatives are likely to result in large volumes of transatlantic share trading as low-cost alternative trading platforms take advantage of cheap post-trade costs.
“For the first time, there will be low post-trade costs to trade U.S. stocks,” said Diana Chan, EuroCCP chief executive. “This is a step towards transatlantic trading, allowing a few more hours window to trade.”
Turquoise, a pan-European trading platform 51 percent-owned by LSE, plans to start by offering trading in U.S. dollars in 175 of the most liquid U.S. stocks, American Depository Receipts (ADRs) and Exchange Traded Funds (ETFs) from April 23, LSE said on Wednesday. “Trading U.S. securities on Turquoise during European market hours will create new trading opportunities for market makers, spread betting firms, proprietary trading firms and arbitrageurs, and will build a pool of liquidity that institutional brokers can leverage for the benefit of their customers,” said David Lester, chief executive of Turquoise in a statement.
Alternative platform NYSE Arca Europe said it would start offering the 100 companies in the S&P 100 index sometime in the second quarter of this year, with other names likely to be introduced later.
EuroCCP, a relative newcomer that has made limited inroads into Europe’s crowded post-trade market, may gain additional clients from its ability to go through its DTCC account to offer the same post-trade fees for high-volume clients as it charges them in the United States.
For the LSE, the move shows how the exchange can use the more nimble multilateral trading facility (MTF) structure of Turquoise to make strategic moves to increase its business.
The Turquoise list will include ETFs based on the S&P 500 and Nasdaq 100 indexes, MSCI country and regional indexes and major household names such as Citigroup (C.N), Apple (AAPL.O) and Alcoa (AA.N), and ADRs of key European names such as BP (BP.L) and Vodafone (VOD.L), LSE said.
The service will be free for three months and introduce a maker-taker tariff system thereafter, LSE said. In such a system, market players who post bid and offer prices on the electronic trading platform get advantageous pricing.
Deutsche Boerse (DB1Gn.DE) also offers trading in U.S. stocks during European time, using its affiliates Eurex and Clearstream, which act as intermediaries to clear and settle on DTCC.
Chan claimed that EuroCCP’s post-trade service will be cheaper — as low as one-fifth of a euro cent per side for its largest clients, or the equivalent of the one-third of a U.S. cent it charges them in the United States.
Brokers and others will be able to net out their exposures — setting long and short positions off against each other to reduce risk exposure — on Turquoise and on NYSE Arca, and clients large enough to maintain DTCC accounts of their own in the United States will be able to net easily via EuroCCP’s account, she said.
EuroCCP also plans to seek UK regulatory approval to allow clients to net their holdings directly with holdings in the United States, she said. (Editing by Louise Heavens)