The London Stock Exchange (LSE) has reported that the amount of money it makes from UK cash equities trading has dropped since the introduction of a new tariff structure in September last year.
From September 2009 through February 2010, the LSE made an average of 0.8 basis points on value traded, compared to 0.86 bps for the 11 months to the end of February 2010, according to the exchange’s pre-close period update. The yield reduction indicates that the LSE’s members are paying less for trading on the exchange.
The interim 11-month figures were released ahead of the LSE’s full-year results for the year ended 31 March, which will be announced on 21 May.
Last September, the LSE dropped its ‘maker-taker’ fee structure, which charged members for removing liquidity from the exchange’s order book and paid those adding liquidity a rebate, in favour of a tiered model that levies equal charges for both adding and removing liquidity.
The exchange currently charges 0.45 basis points per trade for the first £2.5 billion of value traded, 0.40 bps for the next £2.5 billion, 0.30 bps for the next £5 billion and 0.20 bps for all subsequent value traded.
The cost of trading on the LSE has declined further since the start of March following cuts to cost of trade netting levied by UK settlement agent Euroclear.
Under the new tariff, which the LSE estimates will result in £10 million of post-trade cost savings over the next year, Euroclear’s total charges, including settlement for trading firms that trade in large volumes, will drop to 0.9 pence from 2.2 pence per transaction. In addition, clients will be charged per netted transaction for trades conducted on the LSE’s SETS electronic order book rather than per gross transaction.
“We are pleased that Euroclear has removed the gross charge for netting SETS trades which, in addition to our own ongoing tariff cuts, will further reduce the overall cost of trading for our major clients,” said LSE CEO Xavier Rolet in a statement.
The LSE also reported that the average daily value traded declined 35% year-on-year to £4.6 billion. Trading in January and February 2010 improved slightly to £4.9 billion and £5.1 billion respectively, although March is expected to be closer to the year-on-year average.
“The Group has seen some encouraging levels of activity in the business in the last quarter of the financial year, although market conditions remain variable,” said Rolet. “We continue to take action to ensure the group competes effectively and expands its services.”
The LSE completed the acquisition of pan-European multilateral trading facility (MTF) Turquoise on February, which it plans to merger with its own Baikal MTF. The LSE expects exceptional costs related to merging the two MTFs of up to £20 million, which will largely be recognised in the current financial year.
The LSE, excluding Turquoise, had a 54.6% market share of trading turnover in UK FTSE 100 stocks in February 2010, according to figures from data vendor Thomson Reuters, down from 69.8% in February 2009. Including Turquoise, the LSE’s February 2010 market share was 58.5%.