A new multilateral trading facility (MTF) for Spanish stocks is planned for launch by Q1 2011, to challenge the dominance of domestic exchange the Bolsas y Mercados Españoles (BME).
Plataforma Alternativa De Valores Españoles (PAVE) has been set up by a group of Spanish financial executives and claims that it will offer trading that is at least 66% cheaper than current trading costs in Spain. The team is currently seeking support from local and international banks and has invited further investment into the company. PAVE will be based in Barcelona, with operations in London.
MTFs such as Chi-X Europe and Turquoise have struggled to gain a foothold in Spanish equities because of clearing and settlement complexities. Settlement of a trade by national central securities depository (CSD) Iberclear requires an identification number that can only be generated via one of the Spain's exchanges in Madrid, Barcelona, Bilbao and Valencia. To circumvent this, MTFs' central counterparties aggregate their Spanish trades after the end of daily trading then send them to a local broker, which crosses the trades with itself in the closing auction to generate the required identification number.
However, this process is set to change after a proposal from the BME to allow MTFs to form bilateral settlement relationships with Iberclear and receive the number directly from Iberclear, eliminating the additional cost and time of crossing trades on-exchange. The change is expected in Q4 this year.
Last month the BME accounted for 84.07% of trading by turnover in Spanish blue chip index IBEX 35, according to data vendor Thomson Reuters.