SOR upgrade leaves Turquoise ready to pounce – Lederman

Although alternative trading venues failed to benefit from the shutdown of the London Stock Exchange (LSE) on 8 September, Eli Lederman, Turquoise’s CEO, thinks the outcome will be very different should a further outage occur.
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Although alternative trading venues failed to benefit from the shutdown of the London Stock Exchange (LSE) on 8 September, Eli Lederman, Turquoise’s CEO, thinks the outcome will be very different should a further outage occur.

Speaking to theTRADEnews.com at Turquoise’s formal launch this morning, Lederman said alternative venues had been unable to grab market share because of the configuration of many brokers’ smart order routers. “They simply hadn’t accounted for the possibility that there wouldn’t be a primary market, and some of the logic of their smart order routing still relied on looking for the primary first,” he commented.

The London Stock Exchange was out of operation for seven hours on 8 September, but UK equity trading ground to a halt rather than switching to alternative venues such as Turquoise or Chi-X. While both platforms experienced a short-term spike in volumes, brokers felt unable to operate without access to price data from the primary exchange.

Lederman said brokers have now corrected the problem. “In this instance, the primary wasn’t there and the logic in the smart order routing didn’t operate as it would if it happened again, because they have spent time in making sure that it will,” he said.

Another reason new venues did not capitalise on the LSE’s misfortune, according to Lederman, was that not everyone is connected to them. It is taking time for traders to become accustomed to new execution platforms as both price formation and price discovery mechanisms, he said. But Lederman believes that this, too, is improving. “I’m confident that it is moving in the right direction swiftly, and if an outage were to happen again with any of the primaries I think there would be a very different response,” he said.

Lederman marked the formal launch of Turquoise at 08.00 today by ringing the platform’s bell, cast at the Whitechapel Bell Foundry – a 500-year-old company. Since it began trading its full complement of 1,267 stocks across 13 European markets on 29 August, Turquoise has traded a cumulative value of €10 billion, with €1 billion traded on four consecutive days and €6 billion traded in the week of 15 September. It has garnered a pan-European market share of 2%, and regularly has a market share in excess of 5% for over 90 stocks. The platform said it is on target to reach a 5% pan-European market share by the end of this year.

Although Turquoise has now officially launched, there is still work to be done, according to Lederman. “This begins a new phase in the development of Turquoise,” he said. “We still have a long way to go in terms of acquiring members and making it an even more liquid market.”

Turquoise will now build up its

non-displayed trading segment, which will allow trading in large blocks of stock anonymously. “Although we compete on microseconds and milliseconds like the others, it is more important to provide the service in trading that people want, which means transacting in institutional size,” said Lederman.

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