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Capital Markets

Exchange competition: The empire strikes back

The launch of faster, higher-capacity systems by exchanges will make life harder for ATSs.

Rivals praying for a disaster were horribly disappointed by the remarkably smooth launch this June of the London Stock Exchange’s new electronic trading system, which passed without a glitch.

TradElect, the new system, which is already in use at the Johannesburg Stock Exchange, replaces the old Sets order book and dramatically improves the speed and capacity of the LSE. According to the exchange, traders will now be able to execute trades fully in "around 10 milliseconds", while the new system increases the volume that the exchange can handle fivefold – enough, boasts the LSE, to handle the current trading volume of all the equities in Europe.

High-volume appeal

The LSE is betting that the speed and capacity of its new system will make the market more attractive to high-volume traders, although realistically price is an equally relevant consideration.

"The introduction of TradElect is the culmination of a four-year investment in next-generation technology that will deliver a step change in trading capabilities to the London market," says David Lester, chief information officer at the London Stock Exchange. "As high-frequency traders look globally for pools of liquidity in which to find alpha opportunities, TradElect sets new benchmarks in terms of system performance."

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