Deutsche Börse’s recent spate of acquisitions and product launches will help the exchange attract a variety of investors and compete more effectively in an increasingly pan-European trading environment, according to a senior executive.
In November, Deutsche Börse launched the Xetra International Market (XIM) pan-European equity trading service, bought a majority stake in retail exchange Tradegate and acquired algorithmic news firm Need To Know News. In December it started trading corporate bonds and exchange-traded notes on its Xetra electronic trading platform.
Rainer Riess, managing director, Xetra market development, Deutsche Börse, said the recent enhancements were designed to cater to a range of participants from retail to high-frequency traders.
XIM is the first pan-European trading venue to operate as part of a vertical silo, using Xetra as its trading engine and fellow Deutsche Börse subsidiaries Eurex Clearing and Clearstream for clearing and settlement. “XIM will be crucial in helping us to compete better with MTFs, expand geographically and build market share,” Riess told theTRADEnews.com. “We believe there will be three or four pan-European platforms after consolidation, and we are striving to be one of those.”
Riess said that Deutsche Börse is always looking to run further markets as attractive opportunities arise, which drove its decision to purchase a controlling interest in Tradegate, a pan-European trading venue for private investors to trade equities, bonds and funds. As part of the deal, Deutsche Börse also bought a 5% in Tradegate AG Wertpapierhandelsbank, one of the market makers on Tradegate Exchange, with an option to increase its stake to a maximum of 20%.
“While a pan-European trading and clearing infrastructure is emerging in the blue-chip space, it will probably take a little while before this extends to the retail market,” said Riess. “In time, I think pan-European retail trading will become an important capability for exchange groups. Some large players such as Citadel and Optiver have begun to make moves in this space.”
Citadel, a proprietary trading firm, bought a majority stake in retail-focused pan-European trading venue Equiduct in July. Fellow prop shop Optiver launched The Order Machine, a routing service for retail orders, in conjunction with Dutch bank BinckBank in June.
By moving its bond trading to Xetra, Deutsche Börse hopes to reach a wider European audience and capitalise on the increasing interest shown in corporate bonds. From 1 December, 700 euro-denominated corporate bonds were made available for trading on Xetra, backed by market makers.
“Bond trading is currently well behind the equity markets in terms of transparency and ease of trading,” said Riess. “There is a demand for corporate bonds from both institutions and retail firms, but not enough transparency, which is why we took this step.”
To improve its offering to high-frequency traders, Deustche Börse acquired Need To Know News (NTKN), which, according to Riess, complements its Market News International (MNI) division, a news agency the exchange bought in January 2009.
“High-frequency traders need swift information on macro market news, and the demand for machine-readable news to provide faster access to reliable and transparent information has increased in line with this,” he said. “Now we have MNI to provide the content, and NTKN to convert this news so it can be fed directly into algorithmic trading machines.”