Exchange group Deutsche Börse is examining ways to offer low-touch execution services directly to the buy-side, such as direct market access and order routing, through partnerships with third parties.
“We are looking at joint-venture opportunities with brokers, technology providers, FIX messaging providers and others,” Frank Gerstenschläger, member of the executive board of Deutsche Börse with responsibility for the cash market, told theTRADEnews.com. “The core objective will be to get in touch with the buy-side,” said Gerstenschläger. “It is about working with someone who is well-established with the buy-side, either technology-wise or through other business.”
The plans follow press reports at the beginning of this year that Deustche Börse had opened negotiations to buy agency broker and trading technology firm Neonet. At the time, the Sweden-based broker confirmed only that it was in discussions with a “counterparty” about a possible cooperation. Neonet abandoned the discussions on 16 January.
The Deutsche Börse executives deny that offering low-touch execution services would place the exchange in direct competition with sell-side members. “Brokers provide a lot of services for the buy-side that never could,” said Gerstenschläger. “We would never be able to participate in complex trades, prop trading initiatives or risk-taking. We’re looking more at areas such as smart order routing with some operations required for execution services.”
Yesterday, Deustche Börse revealed plans to launch a pan-European trading platform, Xetra International Market, in the fourth quarter of this year.
The new platform will allow the 250 existing members of the exchange’s Xetra electronic trading platform to trade pan-European equities, exchange-traded funds and derivatives on the same platform.
During its first phase, the platform will focus on the constituent stocks of the Dow Jones EURO STOXX 50 pan-European large-cap index, which contains shares from 6 European countries – Belgium, Finland, France, Italy the Netherlands and Spain. In the second phase, which will commence in 2010, the firm will expand this to the STOXX 600.
Trades will be cleared through Eurex Clearing, Deutsche Börse’s central counterparty, and settled in the relevant stock’s domestic central seecurities depository (CSD) using Clearstream, Deutsche Börse’s CSD, as the settlement agent.