Spain-X MTF, a new multilateral trading facility (MTF) for Spanish stocks, will aggressively target a market share of 5% shortly after launch, to ensure it gains traction among market participants.
The new venue is the brainchild of investment bank Capital Partners Group and will use Qube, a hosted matching engine from alternative venue operator and technology provider Quote MTF.
“The Spanish market is showing clear signs of opening up, evidenced by the growing market share of BATS Chi-X Europe and other MTFs,” Claudio Rojas, director at Capital Partners Group, told theTRADEnews.com.
The ability of alternative venues to gain a foothold in Spain – the region’s sixth largest domestic market according to Thomson Reuters data – has been hampered by post-trade difficulties. Currently, it is prohibitively expensive for MTFs to settle trades in Iberclear, the central securities depository owned by Bolsas y Mercados Españoles (BME).
However, the introduction of title VI reforms by Spanish regulators will harmonise the settlement cycle and costs between the domestic exchange and MTFs. Within the last 12 months, MTFs BATS Chi-X Europe and Turquoise have managed to dent the BME’s dominant market share position with price promotions that reduce the costs of trading in Spain.
BATS Chi-X Europe’s CXE order book has grown its market share of Spanish stocks from 1.99% in September 2011, to 2.89% in September 2012, while London Stock Exchange-owned Turquoise has increased its share from 0.19% to 0.72% over the same period.
The difficulties of establishing a rival platform to the BME were put into stark contrast earlier this year after Platforma Alternative de Valores Españoles (PAVE), a planned MTF for Spanish stocks, was put on hold after it failed to gain the required funding from market participants.
Local support
Javier Tordable, former founder of PAVE and former CEO of Swedish technology company Cinnober, said local backing would be key to the success of Spain-X MTF.
"It is good news that the BME will be under renewed pressure and the recent success of other MTFs in Spain suggests the market is closer to opening up than ever before," said Tordable. "Its success will depend on clear commitment from the main players in the Spanish market, something we were not able to do with PAVE because of the European debt crisis."
Rojas said he recognised the importance of gaining the required local support and that he was in advanced discussions with a number of Spanish institutions over a shared equity ownership model that would also help secure initial liquidity on Spain-X MTF.
“After we have attained 5% of market share, we are confident that investors will become aware of the ability to trade in Spain via an alternative market, which will allow us to further develop our offering.”
The use of Quote MTF’s Qube is expected to help Spain-X MTF keep its cost low. By using Qube, the MTF will not have to spend time and funds obtaining a regulatory licence and can benefit from a hosted solution that is between a quarter and a tenth of the hosting costs offered by other providers. Qube also offers drop copy and monitoring facilities and accommodates different types of matching priorities.
“We are delighted to be working with Capital Partners Group and are confident that with our committed support, Capital Partners Group can orchestrate a valuable contribution to the market structure in Spain,” said Quote MTF CEO Tamas Madlena.