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High Performance and Transparency in Europe's Exchange Sector

The autumn season of 2010 holds the promise of extreme exchange action in the European arena as all of the major incumbent exchanges proceed with major investments in their matching engine, data centre and connectivity infrastructures. Clearly, this has all come in response to the arrival of a glut of multilateral trading facilities (MTFs) since the launch of the most successful of them – Chi-X Europe – back in mid-2007.

The exchanges – which are ploughing millions of [currency of your choice]s into their platforms - seem to be banking on the onset of fragmentation fatigue, which has been reported in the US and may yet take hold in Europe. This condition – which affects both buy- and sell-side practitioners – apparently makes victims question why they are connecting to endless new arrivals in the execution space. By offering superfast matching engines and ultra-low-latency connections to them, exchanges seem to be betting that frag fatigue victims will stay put.

And they’re betting heavily.

Up first is NYSE Euronext, which is due to go live with its Basildon, Essex, data centre during October. The exchange has announced connectivity options and all seems to be proceeding according to schedule. By the end of October, it hopes to have migrated its UTP-based matching engines for the core NYSE Euronext European markets by the end of September with NYSE Liffe, NYSE Arca Europe and Smartpool markets following during October.

Not to be outdone, the London Stock Exchange says it will migrate its markets to its new Millennium Exchange platform in October, starting with Turquoise, its hybrid dark/lit platform for pan-European securities. The exchange plans to move all of its markets, including the core London market and Borsa Italiana, off the TradElect system and onto a faster platform provided by Sri Lanka-based MillenniumIT, which it acquired a year ago.

Nasdaq OMX Europe continues to migrate its primarily Nordic markets onto its Inet trading platform. Success of the system in Stockholm, where practitioners are beginning to see an uptick in high frequency trading techniques, is creating high hopes as Nasdaq moves its other Nordic exchanges onto the faster matching engine. Inet – derived from Nasdaq’s one-time ownership of Instinet – will replace Nasdaq’s Saxxess and Click Trading legacy platforms. Meanwhile, Nasdaq appears to be placing further bets in IT services as a business with the acquisition of Australian market surveillance specialist Smarts, which will become part of the Nasdaq OMX Market Technology group. Smarts counts some 30 national exchange and regulatory groups as its customers, as well as many broker/dealers.

Finally, Deutsche Boerse has outlined plans to migrate its platforms to a new Equinix site in Frankfurt. The German exchange group, though, is taking a decidedly high-latency approach in terms of delivery date, with the deployment of high-performance matching engines for its Xetra (cash) and Eurex (derivatives) markets not expected until the end of 2011.

That said, a prototype of sorts will go live this autumn, as Deutsche Boerse’s International Securities Exchange (ISE) in New York rolls out a new platform that makes use of IBM’s WebSphere MQ Low Latency Messaging system. ISE will go live in November, giving a flavour of what’s to come in Europe in 2011.

Doubtless, the MTF community will be paying rapt attention, keen to pounce on any hiccup and draw liquidity to their own high-performance platforms.

High performance, transparency: the European exchange platform segment’s got it all.

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