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Last Thursday, the London Stock Exchange and Lehman Brothers announced a European-wide multilateral trading facility (MTF) for large trades between institutions – trades which typically do not appear of the display boards of institutions and form a “dark liquidity pool”. This new MTF, called Baikal, will combine a dark liquidity pool with liquidity-seeking algorithms.
Baikal, named after Lake Baikal, the deepest and, by volume, largest freshwater lake in the world, will be run by the LSE and will offer brokers access to securities in 14 countries with smart order liquidity-seeking algorithmic strategies routing to 22 trading venues. The facility will also offer surveillance tools, real-time post-trade reporting and a pan-European clearing and settlement service including aggregation of trades matched within Baikal. No implementation date has yet been given.
Clara Furse, Chief Executive of London Stock Exchange, said “The London Stock Exchange has an over-arching objective to improve market efficiency for the benefit of investors and issuers, and we will continue to innovate to promote that goal. Baikal provides an exciting opportunity for the market to transact certain types of business in European equities with the confidence of total pre-trade anonymity, alongside the efficient price formation of the electronic order books of exchanges, where the majority of equities across Europe are traded.”
Also last week, ten Swedish financial institutions announced that they would launch a new MTF specialising in Nordic equities in the first half of 2009. This new platform, to be called Burgundy, is backed by SEB, Handelsbanken, Swedbank and seven other brokers who collectively account for nearly half of the trading volumes on OMX Stockholm, the main exchange for Swedish equities.
Baikal will compete directly against Burgundy as well as Turquoise (“Burgundy Blue”, as Frank Sinatra used to sing?) the MTF planned for launch in September this year by a consortium of Citigroup, Goldman Sachs, Merrill Lynch, Morgan Stanley, UBS, Credit Suisse, Deutsche Bank, BNP Paribas and Société Générale.
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