Burgundy, the new Nordic multilateral trading facility scheduled to launch in the first half of next year, has been established in reaction to the predicted rise in the volume of Nordic stocks being traded outside the region, according to sources close to the project.
Pan-European MTF Chi-X already offers trading in Swedish, Finnish, Danish and Norwegian stocks, while Turquoise, the trading platform backed by global investment banks, will also deal in Nordic stocks from September. Both platforms are located in London.
A shift in trading volumes from Stockholm to London would potentially put Swedish brokers at a latency disadvantage to London-based rivals. “The difference between Chi-X and Burgundy is that the Burgundy hardware will be based in the Nordic countries,” said Torbjörn Ericsson, head of staff functions, merchant banking at SEB, one of Burgundy’s 10 founding banks. “When using Chi-X, we are disadvantaged because we are accessing a market in London from a Nordic country. This causes latency problems,” said Ericsson.
Burgundy is backed by SEB, Handelsbanken, Swedbank and seven other Swedish brokers that collectively account for around 45% of trading volumes on OMX Stockholm, the main exchange for Swedish equities.
Nasdaq OMX, the exchange group that operates the Stockholm exchange, welcomed the new competition. “Based on our experience from the US, more players can help to create new liquidity and higher trading volumes. However, we remain focused on our mission to develop the Nordic markets for the benefit of all market participants,” said Hans-Ole Jochumsen, head of OMX Nordic Exchange.
But a sense of uncertainty over the plans of the incumbent exchange since the merger of OMX, which operates the Stockholm, Copenhagen and Helsinki exchanges, with US exchange group Nasdaq has been cited as a catalyst for Burgundy’s launch. “There’s a growing feeling that Nasdaq OMX will gradually become more Nasdaq than OMX. Nasdaq doesn’t have strong links with the Swedish broking community and could easily move the centre of its European operations to London, where it can compete directly with Turquoise and Chi-X,” said a senior source at a large Swedish bank.
Despite an overlap with pan-European MTFs in the trading of Nordic blue chips, project spokesperson Tom Dinkelspiel insisted that Burgundy does not compete head on with Chi-X and Turquoise because of its focus on mid-cap and smaller Nordic stocks. “We have a much broader perspective than Turquoise and Chi-X when it comes to the Nordic markets,” said Dinkelspiel. “We are a complement to the other MTFs.”
Dinkelspiel said Burgundy aimed to offer very low latency times, and is discussing the possibility of using the maker-taker pricing model already adopted by a number of other MTFs. The platform plans to clear and settle trades though the existing channels used by Nordic stock exchanges.