London Stock Exchange predicts 'testing' times

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LSE has lost market share to multilateral trading facilities such as Chi-X and BATS since European regulation increased competition in 2007.

It cited a decline in British trading activity and the introduction of a simplified tariff structure in September that reduced the average yield per trade.

Xavier Rolet, LSE chief executive, said: "Market conditions are expected to remain testing in the current quarter.

"We continue to work on ways to leverage the assets and develop opportunities across the group to provide a platform for growth further ahead."

Revenue fell to £154.9 million for the three months to the end of December on 2008 but was up four per cent on the previous quarter. The year-on-year decline amounted to 12 per cent on a constant-currency basis.

Most of that drop came in cash equities trading revenue from the British and Italian subsidiary Borsa Italiana, which combined fell 29 per cent year-on-year in the quarter and 32 per cent for the year to date.

The exchange's share of trading in FTSE 100 stocks has fallen below 57 per cent this month from nearly 96 per cent in early 2008, according to Thomson Reuters. In Italy, average trading volumes fell six per cent, although revenues grew 23 per cent in its fixed-income trading business.

Post-trade revenues fell 13 per cent in the quarter because of an expected decline in interest on the margin held in its clearing business from high levels a year ago.

Revenue from the primary market rose by 14 per cent to £18.2 million versus a year ago as issuance rose to £25.9 billion, with £22.8 billion from secondary issues.

The group's information and technology services rose three per cent, with a first-time contribution from newly acquired firm MillenniumIT.

The LSE announced last month an agreement to buy rival MTF Turquoise and merge it with its Baikal dark pool to form a pan-European trading venture.