Turquoise, the multilateral trading facility (MTF) owned by the London Stock Exchange (LSE), has confirmed the details of its derivatives trading strategy, which will be based on the exchange group's existing EDX London derivatives market.
Turquoise Derivatives will use EDX's technology and current clearing infrastructure, which will enable existing EDX customers to gain immediate access to the new offering through their existing connections. EDX uses the SOLA platform built by Canadian exchange operator TMX Group, with which the LSE is planning to merge, in a deal that would create a £3.4 billion exchange group.
European central counterparty LCH.Clearnet will provide the clearing and risk management functionality, as it currently does for EDX, while CC&G, the Italian central counterparty that was acquired by the LSE as part of its purchase of Borsa Italiana, will provide the technology and processing capabilities.
“We are delighted with this development of our successful relationship with London Stock Exchange Group and to be supporting Turquoise Derivatives in their innovative offering,” said Roger Liddell, CEO at LCH.Clearnet. “Clients will benefit from seamless access and our long and proven experience in clearing listed derivatives.”
Turquoise Derivatives plans to offer trading in pan-European single name and index futures and options. The timetable for the rollout of derivatives will be announced in Q1 2011, but it is believed that the market will begin with contracts based on the FTSE 100 index.
The LSE's intentions to enter the derivatives space were first identified by CEO Xavier Rolet at the firm's results presentation in November, where he targeted the duopoly held by NYSE Euronext's Liffe and Eurex, the derivatives market joint owned by Deutsche Börse and SIX Swiss Exchange.
The future of Eurex and Liffe is currently uncertain following the proposal to merge Deutsche Börse and NYSE Euronext, which could potentially create a derivatives monopoly. that may be prohibited by competition authorities.
“The European derivatives market is currently characterised by high execution costs and a lack of choice,” said Turquoise CEO David Lester. “I am certain that Turquoise Derivatives, combined with the proven operating and clearing model already enjoyed by EDX customers, will be the start of the process that turns the sector on its head.”
As part of the launch of Turquoise Derivatives, the LSE will transfer ownership of the EDX London business to the MTF. Prior to the transfer, the LSE will purchase TMX Group's 19.9% stake in the entity for £3.9 million, in a transaction that is expected to complete on 1 May 2011.