The London Stock Exchange (LSE) said it is on track to launch the smart order routing function of its Baikal dark pool and liquidity aggregation service this week following regulatory approval by the UK Financial Services Authority (FSA). The exchange plans to roll out Baikal’s order book and further functionality later in the year.
Baikal’s router will allow users to trade across 17 major lit and dark European equity trading venues in 14 countries using a single entry point, connection and clearing arrangement.
From launch, the service will route orders in 6,500 equities and exchange-traded funds. Over-the-counter settlement provided by BNP Paribas Securities Services will remove clients’ need for multiple clearing house memberships and associated margin calls, according to the LSE.
“In line with our ambitious launch timetable, we have delivered the first part of Baikal’s solution for aggregating liquidity and solving the challenges of market fragmentation,” said LSE CEO Xavier Rolet in a statement. “We look forward to building on this important milestone with the launch of the non-displayed order book and further liquidity aggregation services later in the year.”
Baikal has been authorised by the FSA as an investment firm and has permission to operate a multilateral trading facility (MTF). The LSE said Baikal is continuing to refine and develop its market model to maximise value to participants and satisfy the requirements of the MiFID pre-trade transparency regime that are applicable to non-displayed MTFs.
The LSE first unveiled Baikal in June 2008 as a joint venture with investment bank Lehman Brothers. Following the bank’s collapse in September, the LSE continued with the project alone. Baikal is headed up by John Wilson, a former Lehman executive.
Baikal joins a growing list of dark trading services offered by European equities execution venues. Since the start of this year, new dark trading functionality has been launched by Chi-X, Turquoise, Nasdaq OMX Europe, BATS Europe and NYSE Euronext.