The London Stock Exchange is in talks with a number of new City investors for Baikal, its pan-European equity trading facility, to replace Lehman Brothers which had been the exchange’s partner until its recent collapse.
John Wilson, Baikal’s chief executive, is also in final negotiations with potential new software providers for the technology required for new trading platform and hopes to have a deal agreed by Christmas. The new provider should be announced in the new year.
The LSE, headed by Dame Clara Furse, plans to have Baikal Mark II up and running by next spring despite the problems caused by the Lehmans debacle. Discussions are now also taking place with several potential investors from both the buy-side and sell-side to take part in the new subsidiary, which will be be majority owned by the LSE.
Mr Wilson said market players were previously less interested in becoming involved in Baikal because so many had been put off by the dominant role that Lehman Brothers had in the original business.
Baikal is being set up to provide the market with a “dark liquidity pool” for trading in equities for the execution of non-display orders with highly sophisticated algorithmic trading functionality.
Wilson said the move towards building “dark pools” of liquidity is gathering strength despite the recent market volatility and downturn in market volumes. Icap, the inter-dealer broker, announced last week that it had hired the head of equities trading from JP Morgan to lead its plans to create another dark pool for equities trading.
In another move, the LSE announced a new partnership with the Oslo bourse last week. London and Oslo will be looking to build on their strong energy sectors in both cash and derivatives products. It is expected that TradeElect, the LSE’s state-of-the-art trading system, will replace Oslo’s existing equity market platform over the next year.