The London Stock Exchange (LSE) announced yesterday a deal to take over its loss-making rival Turquoise, creating a new pan-European trading platform that would run independently of the LSE.
Europe’s largest stock market said it would take a 60 percent stake in the smaller pan-European Turquoise trading platform, owned by investment banks.
The LSE said it would incur exceptional costs of up to £20 million (US$32.3 million) as a result of the deal.
The LSE, led by French chief executive Xavier Rolet, said it planned to merge Turquoise with its “dark pool” Baikal business, named after a Siberian lake.
Dark pools are sites on exchanges where large trades can be executed for clients anonymously so as not to disrupt the market.
“London Stock Exchange Group [LSEG] and Turquoise Trading Limited today announced their agreement to create a new pan-European trading venture through a merger of the businesses of Turquoise and Baikal Global Limited,” the LSE said in a statement. “Continuing to trade under the Turquoise name, the merged entity will be 60 percent owned by LSEG and 40 percent owned by the existing Turquoise shareholders, who are global investment banking clients of LSEG.”
Rolet, chairman-designate of the new venture, said the new venture would offer “an attractive range of innovative and competitively priced products and services across Europe.”
“The European marketplace for trading securities has scope to become more efficient and to grow significantly in the coming years,” he said.
The LSE said that “significant cost savings are expected to be achieved by merging Baikal and Turquoise.”
Turquoise was set up in 2006 by a consortium of nine investment banks, including Goldman Sachs and Morgan Stanley, in response to high trading fees being levied by the LSE.
Launched officially in August last year, it has yet to make a profit.
The LSE has faced competition from new share trading platforms since EU regulators opened the doors to them in 2007.
Britain’s biggest employers’ organization said yesterday that the country’s economy would finally emerge from recession by the end of the year, but faces a “fragile path of slow growth” ahead.
Meanwhile, the Confederation of British Industry (CBI) predicted that the British economy would grow by 0.5 percent in the final quarter of this year, after six quarters of recession.
Britain is the last major world power mired in recession, official data showed last month.
The CBI forecast growth of 1.2 percent next year and 2.5 percent in 2011.
However, British GDP will still not have returned to its pre-recession level by the end of 2011, CBI said.
“The outlook is brightening as the global economy finds its feet, although we will need to keep our nerve during early 2010, and there is no sign of a clear driver of strong economic growth,” CBI deputy director general John Cridland said.
“In the spring, many staff will face another cycle of wage freezes and job losses will continue rising until the autumn,” he said.
“The economy will be on a fragile path of slow growth and it remains vital that government sets out clearer plans to address the fiscal deficit at its next opportunity in order to help shore up future UK economic prospects,” Cridland said.
The CBI forecast that unemployment would continue to rise over the coming quarters, peaking at just more than 2.8 million in the third quarter of next year.
After constrained wage growth during this year and next year, average earnings would rise somewhat faster over 2011, at 3.9 percent, it predicted.
“The UK economy faces a number of structural hurdles over the coming two years, and this recovery — like that of the 1980s — will be relatively drawn out,” CBI chief economic adviser Ian McCafferty said.
“Credit conditions will remain difficult as the banks slowly nurse themselves back to health, consumer spending will be shaped by the need to rebuild savings, and the public sector will soon have to tighten its belt,” he said.
“All three factors will act as headwinds to growth,” McCafferty said.
The CBI also predicts that interest rates will rise from their current record low 0.5 percent to 2 percent by the end of next year.
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