Top investment banks step up plans for rival exchange to LSE

Project Turquoise, the pan-European share-trading platform, announced yesterday that it had appointed America's Depository Trust & Clearing Corporation (DTCC) to process trades over the planned rival to Europe's stock exchanges.

It will give the DTCC - which clears and settles all share trades in the US - its first significant foothold in Europe through its subsidiary EuroCCP, which will be based in London and be regulated by the Financial Services Authority.

Clearing organisations sit between a buyer and seller of a share to ensure a trade goes through if one side defaults, while settlement companies deal with transferring shares to buyers and money to sellers.

The DTCC plans to sub contract settlement to Citigroup, which is also a member of the Turquoise consortium.

It is understood that Turquoise had talks with eight rival clearing and settlement organisations, three of which were described as "very serious proposals" before deciding to appoint the DTCC.

Sources close to the consortium said its appointment was a "crucial step" in the platform's development.

Turquoise is aiming to be up and running by the end of the year and is being set up by a group of City investment banks, which have complained that the fees they are charged by traditional stock exchanges are too high.

They are hoping the introduction of the European "Mifid directive" - which requires brokers to seek the best possible price on shares for clients regardless of the trading platform or exchange where it can be achieved - will bring business to the venture.

Headhunter Armstrong International has been appointed to search for a chief executive of the new company, which will initially concentrate on trading in Europe's biggest and most liquid stocks but has ambitions to expand its activities into medium-sized companies after it is established.

A spokesman for Turquoise said: "A pan-European trading facility requires a single pan-European approach to clearing and settlement.

"We expect our agreement with EuroCCP will deliver the quantum leap that the market place needs. It gives us immediate economies of scale through the use of the existing infrastructure of its parent company. Their combination with Citi's global transaction services business will ensure the best single cross-border settlement network in Europe."