Project Turquoise offered for sale to major exchange groups

Nasdaq OMX seen as most likely buyer for loss-making share trading platform

Turquoise, the pan-European share trading system set up to rival the London Stock Exchange, has effectively put itself up for sale, with Nasdaq OMX the favourite to buy it.

The exchange has appointed UBS to "review its options" but it is understood that sale details have been supplied to 18 potential bidders.

Nasdaq OMX has long held ambitions to boost its presence in London, and made repeated attempts to take over the London Stock Exchange.

Michael Spencer's Icap has also been mentioned, but while it has received sale documentation, it is not thought to view Turquoise as an attractive prospect given the intense competition it faces and its limited market share.

All the other main exchange groups have been supplied with sale documents, including the New York Stock Exchange, Deutsche Börse and Chi-X, the most successful rival to the LSE in London with a market share of equity trading of around 20 per cent.

Turquoise was set up with a great fanfare by nine investment banks in 2006. It made bold promises to revolutionise share trading, but it took two years for the market to be opened for business. Yesterday it managed to secure a market share of around 7 per cent of trading in FTSE 100-listed equities, although the more usual figure is around 5 per cent. By comparison the LSE still accounts for around two-thirds.

Rivals to traditional exchange groups suffered as a result of them opening up as the downturn really started to bite, resulting in a sharp fall in share trading volumes. At the same time the traditional exchanges slashed costs and sought to protect their businesses by passing on the savings to customers in the form of reduced fees.

Turquoise has on two occasions tapped its investors for cash, and the company suffered a sharp drop in its business in the spring when a liquidity guarantee provided by its shareholders came to an end. This meant they were no longer required to push business through Turquoise.

Although the business has managed to claw back market share, exchange watchers have questioned how attractive it would be to a bidder. "The trouble is, most of its business is still provided by its shareholders, even without the liquidity guarantee. Would they have much motivation to use Turquoise if it were owned by someone else? It's hard to see it," said an exchange industry source.

The review has been prompted by an expected third cash call, at a time when the banks that set up Turquoise are all experiencing some degree of stress as a result of the global banking crisis that has plunged the world into recession. They are BNP Paribas, Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Morgan Stanley, Société Générale and UBS.

Turquoise's chief executive, Eli Lederman, said: "They're now happy to cede control to someone – if the right party or parties appear – to back Turquoise's next steps as a positive influence on European market structure."