Plataforma Alternativa de Valores EspaÃ±oles (PAVE), the Spanish multilateral trading facility (MTF), has chosen Equiduct Systems as its technology provider, with two of Equiduct's shareholders, Knight Capital and Citadel Securities, selected to be market makers for the trading venue.
“Our aim is to increase liquidity in the Spanish market. By teaming up with Equiduct a new flow will be created because of the interaction of London-based brokers, hedge funds, high frequency and algo traders with the Spanish investor base,” said Javier Tordable Parcerisa, partner, PAVE. “Right now the turnover of the Spanish market is around €90 billion. We think the pie will increase in size to €130 billion.” He notes that the MTF will also differentiate itself from the incumbent by focusing on the retail investor market.
Using Equiduct Systems technology for its matching engine, market data and connectivity platform, PAVE will establish both a traditional MTF and a retail-focused best execution model. The platform aims to provide trading at a cost 66% lower than is current available.
“The Equiduct model allows provision of a central order book in the traditional exchange space to be matched with a very innovative offering for the retail market,” said Peter Randall, CEO of Equiduct Systems Limited, “PAVE signals the beginning of the second wave of alternative platforms in Europe. The health of Europe's trading environment is, in part, determined by the level of competition. Equiduct Systems is proud to support this initiative.”
PAVE was conceived to open up the Spanish equities market to competition. Currently the Spanish market is dominated by Bolsas y Mercados EspaÃ±oles (BME), with other MTFs offering trading in Spanish equities stymied by the current clearing system.
The current clearing system requires an identification number to be generated by one of the exchanges in Madrid, Barcelona, Bilbao and Valencia for the national central securities depositary, Iberclear, to clear the trade. MTFs send aggregated trades to a Spanish broker to cross them on the BME at the end of a day. This is due to change in Q4 2010 following a proposal from BME, which will allow Iberclear to provide MTFs with ID numbers.
PAVE is still in its formative period although as Tordable acknowledges it could develop quickly, “We still have to raise funds, incorporate the company and apply for the licence, but if we are lucky everything gets approved and we are up and running by Q1 2011.”