PLUS Markets Group, a UK-based exchange operator, has teamed up with former Chi-X COO Hirander Misra to establish a division that will offer low-cost trading platform technology.
PLUS Trading Solutions (PLUS-TS) will offer investment banks, brokers and trading venues the ability to buy an off-the-shelf matching engine that is designed to comply with the impending MiFID II and the European market infrastructure regulation, which will result in significant changes to equity and derivatives trading respectively.
PLUS-TS has developed a customisable trading engine solution called PLUSMatch, which supports multiple asset classes, connectivity and trade reporting as well as the use of central counterparty clearing where required. The new division will be a wholly-owned subsidiary of PLUS Markets Group, which may syndicate out up to 49% of the equity to external shareholders based on demand and strategic fit.
In addition, PLUS-TS will also provide compliance and market supervision functionality that leverages PLUS Markets Group's existing capabilities. To comply with its status as a recognised investment exchange, PLUS is required to have its regulation, compliance and surveillance functions segregated from its core business.
Management of the existing PLUS1 trading and surveillance platform – which underpins PLUS Stock Exchange (PLUS-SX) and PLUS Derivatives Exchange (PLUS-DX) – and its technology team will transfer to PLUS-TS. Senior management appointments for the new entity and a rollout schedule for product enhancements will be announced in the coming weeks. This will make PLUS-SX and PLUS-DX the first two markets to operate on the new platform.
According to Misra, who is currently working as a strategic advisor for the launch and development of PLUS-TS, the combination of a matching engine and surveillance technology will be compelling for both new and existing trading platform operators.
“The current model used by lit multilateral trading facilities is unsustainable, evidenced by the fact that only Chi-X Europe has reported a profit,” commented Misra. “We will offer a licence-based model that will allow firms to satisfy the regulatory requirements for systematic internalisers, MTFs and organised trading facilities (OTFs) and offer matching and compliance services at a fraction of the current cost.”
MiFID II is expected to introduce OTFs, a broad category of trading venue that would capture any system operated by an investment firm or market operator that brings together buyers and sellers of financial instruments on an organised basis. The OTF regime is largely seen as a category that will encompass new platforms for derivatives that are currently traded over-the-counter and broker crossing networks.
The European Commission is expected to publish final MiFID II proposals on 21 October, with adoption of the new rules expected in 2013.
Misra added that PLUS-TS was currently in conversation with five potential customers, including two banks that are considering using the technology to support MTFs.
Investment banks Nomura, UBS and Goldman Sachs have already launched dark MTFs that operate separately to their internal crossing engines. Nomura's NX and UBS MTF run on proprietary technology, while Goldman Sachs' SIGMA X MTF is hosted on NYSE Euronext's Universal Trading Platform and is located at the exchange group's data centre in Basildon, UK.