German exchange group Deutsche Börse is planning to migrate the remainder of the trading done on the floor of the Frankfurt Stock Exchange to its Xetra electronic trading system from the existing XONTRO system.
It is also planning to phase out ‘lead brokers’ – market makers that operate on the exchange trading floor – and replace them with ‘specialists’. The specialists are market makers whose trading activities are governed by a private agreement with Deustche Börse rather than public law.
The exchange has already shifted mutual funds and structured products onto a specialist system on Xetra, but is now planning to transfer bond and illiquid stock trading.
The decision, which follows a meeting of Frankfurt’s exchange council, is aimed at strengthening the exchange’s competitive position in Europe.
A Deutsche Börse spokesman said the migration would bring greater efficiencies through use of a single trading system, and faster, cheaper trading. He added that execution times for mutual funds and structured products had fallen since their migration to Xetra.
However, the exchange stressed that the move towards specialists does not signal an end to floor trading in Frankfurt. In its meeting, the exchange council “established that there is no doubt that trading in the trading hall will continue,” according to a Deutsche Börse statement. Unlike lead brokers, specialists are paid according to their performance rather than commissions.
Despite the plans, lead brokers’ fate has not yet been sealed. The exchange has not yet decided how or when to make the switch to specialists for the remaining floor-traded products. From September, the exchange will also renew the allocation of order books to authorised lead brokers for a further 30 months, which means they will continue to trade until at least 2012.