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If you had suggested, even quite recently, that the London Stock Exchange would one day lose its dominant role as the City's leading trading platform, everybody would have laughed.
Not any more.
Not only is it coming under pressure to attract flotations from the likes of other major markets, such as Wall Street, Nasdaq, Hong Kong, Frankfurt and Paris, but even those trading platforms in its own backyard are scrambling for market share.
In recent years the emergence of multiple trading platforms such as Chi-X, Nasdaq OMX and the technology driven American outfit BATS Global Markets have also begun eating into its market share. BATS is the newest kid on the block. Its single-trading platform was introduced to European markets barely a year ago, but has already established itself as a major player. Earlier this month, it announced it had achieved almost a 10% share of the London FTSE 100 market. Traders say they expect BATS to become a major player in London during the next few years.
Chi-X has also been making big inroads, which is why the LSE now accounts for less than 50% of the total turnover now being carried out in BP, the UK's biggest blue-chip company in terms of capitalisation. The number of shares the LSE trades in another oil giant Royal Dutch Shell has also plummeted.
Even the junior Plus market is making in-roads. Last week it reported that equity trading volume of more than 11 billion shares had been achieved for the first time in October, just shy of 10% of the total UK equity volume being traded on various exchanges and platforms. The growth has been driven by strong retail trading and reflects Plus's ability to trade all UK equities now, including all AIM stocks since earlier this summer.
In the meantime, the LSE has delayed the introduction of its nascent dark pool Baikal, pending the outcome of takeover talks with Turquoise, a rival multiple trading platform.
Reader views (1)
The savage staff cuts and turquoise talks may have come too late for LSE as they are being squeezed at the top by Chi-X and other dark pool players.
LSE was too slow to react to market innovation. Simon Brickles who headed the AIM operations foresaw their intransigence and got out to establish an alternative stock exchange with dark pool running on a fast Nasdaq OMX trading platform.
LSE failed to impose retaliatory restrictions on Brickles and consequently his PLUS Markets now trade 10% volumes of some large UK shares and significantly nearly 50% of all small and mid cap trades previously done through AIM.
- Frank Woodcock, The Rhondda, Wales
