The London Stock Exchange (LSE) will transfer ownership of the Turquoise Derivatives marketplace from the holding company it part-owns to reduce costs associated with European post-trade rules.
The LSE has agreed to acquire Turquoise Derivatives from Turquoise Global Holdings, in which it owns a 51% stake alongside a group of banks. The move was in part designed to reduce the costs of incoming post-trade rules in the European markets infrastructure regulation (EMIR), which levels higher costs on multilateral trading facilities (MTFs) compared to regulated exchanges.
The derivative trading platform will be renamed London Stock Exchange Derivatives Market and will continue to operate in the way it presently does, but will be part of a regulated market of a recognised investment exchange (RIE), instead of its current classification as an MTF. The LSE said the rebranded derivatives venue would also offer its members increased trading efficiencies.
"Under EMIR, derivatives trading on an MTF will be considered to be OTC, creating potential implications on funding costs. Going through the LSE RIE instead, members should benefit from more efficient arrangements from a market and capital usage standpoint," explains Nicolas Bertrand, head of equity and derivatives markets at LSE Group.
Turquoise Global Holdings will continue to own and operate its pan-European cash equities MTF.
Bertrand said the move would also enable Turquoise to focus its efforts on building the cash equities business, which has seen encouraging market share gains in recent months.
Turquoise Derivatives members that are also LSE members will be able to use their existing LSE membership. Those that are not LSE members will need to apply for membership. Current and new customers will not be charged any application fees or annual memberships fees to access the LSE Derivatives Market.
The technology infrastructure for the derivatives market will remain the same and existing software accreditations will be recognised by LSE.
All clearing arrangements, products and contract specifications will be unchanged and Turquoise's link with Oslo Børs will continue.
LSE will also hold a market-wide consultation on incorporating derivatives rules in to its wider rulebook.
The deal is subject to regulatory approval and is expected to complete in Q4 2013.