Turquoise Derivatives, the multilateral trading facility (MTF) majority-owned by the London Stock Exchange (LSE), has launched a FTSE index options.
“Today's launch signals the next stage in our pan-European expansion,” said Adrian Farnham, chief executive of Turquoise. “We are committed to providing market participants with choice in trading derivatives, offering lower costs, world-beating technology and excellence in customer service.”
Farnham said Turquoise intends to challenge the dominance of traditional venues and hopes to take advantage of recent regulatory change. The vast majority of European listed derivatives trading takes place either on NYSE Euronext's Liffe or Eurex, owned by Deutsche Börse.
New regulation accompanying MiFID proposes additional measures to remove commercial barriers to competition in the trading and clearing of listed securities and derivatives. It will require central counterparties (CCPs), such as NYSE Euronext's Liffe Clearing, to accept clearing of instruments on a non-discriminatory and transparent basis, regardless of the trading venue on which a transaction is executed.
Under such a regime, Liffe Clearing would have to clear competitors' contracts – such as Turquoise's FTSE 100 index options – unless it could prove such as access would threaten “the smooth or orderly functioning of markets”.
“The need for competition is clear, the derivatives landscape is evolving and we fully intend to be at the forefront of that change,” Farnham said.
Turquoise's fungibility of its existing FTSE index futures products has been hampered by a lack of access to the CCP.
Citigroup and securities trading firm Tibra Trading Europe have committed to provide liquidity in the new market.
Although new regulations may create a level playing field between venues, Turquoise believes the FTSE index options are still competitive.
“We have a faster trading platform located in the same place as our data centre for cash equities. This means traders can operate in an environment with less risk,” said Natan Tiefenbrun, commercial director at Turquoise, adding Turquoise Derivatives transaction fees were around 50% lower than that of competitors, while clearing was a third lower.”
Turquoise has given marker-makers a three-month “fee holiday” for FTSE index options and they will thereafter be charged 5p per contract. All other customers will be charged 15p per contract.
The clearing fee for options will also be 2p per contract, which is the same as for Turquoise FTSE futures.