On his morning walk to his office in the City of London, Alasdair Haynes, chief executive of the alternative-equity-trading operator Chi-X Europe, often spots David Lester, the recently appointed CEO of competitor Turquoise Services. Usually, their paths cross at about 7:30 a.m. opposite the HMS Belfast, the World War II battleship that’s moored on the River Thames. Having known each other professionally for years, the two men take the time to stop, shake hands and “compare market share,” says Lester. Explains Haynes, “We are convinced that tongues would wag if we were ever caught having coffee together, but we do like to have a chat.”
As soon as the morning’s pleasantries are over, however, the two men go to their respective offices for another day’s pitched battle in the fiercely competitive market for pan-European equity trading. Increasingly, it’s a contest that Haynes is winning.
Chi-X is at the forefront of a revolution sweeping Europe: Upstart electronic exchanges known as multilateral trading facilities, or MTFs, are taking on — and often beating — once-dominant national stock exchanges. In a process similar to the upheaval seen in the U.S. over the past decade, the MTFs are taking advantage of regulatory liberalization to seize business by offering lightning-fast, low-cost trading capabilities. Their youth is an asset, not a liability. Unburdened by the costs and outdated legacy trading platforms of many centuries-old exchanges, the MTFs are applying the latest technology to service the needs of major securities firms — many of which own equity stakes in the new exchanges — as well as those of the fast-growing community of high frequency trading firms. ....