Pan-European trading venue Equiduct finds new investors
Pan-European trading platform Equiduct has found new strategic investors and revamped its business structure, cutting costs, raising prices, and moving to a mutualized model where it is owned and controlled by its main customers.
Equiduct said on Monday that France-based companies BNP Paribas Securities Services and Viel Group, as well as Belgium-based KBC and London-based market maker Winterflood, have joined Knight Capital Group and Borse Berlin in the new ownership structure.
The terms of the deal were not disclosed.
Hedge fund Citadel LLC, which also has a market making operation, had until recently been one of Equiduct's top investors, but pulled its backing as the platform had not gained as much traction among retail trading firms as had been expected, throwing Equiduct's future into doubt.
Equiduct went live in 2007 after European regulation opened the market to competition. The plan was to quickly build market share by offering steep trading discounts as compared to established exchanges, like those run by NYSE Euronext . But its market share of European equities peaked at just over 1 percent and in the past six months has been in the 0.6 percent to 0.8 percent range.
Equiduct Interim Chief Executive Artur Fischer, who took the job in February when CEO Peter Randall stepped down, said breaking even had replaced building market share in the near term as a primary goal, though he would not comment on how much money the company had lost.
"If we focus on a service that is excellent at price which is low enough that people want it and high enough that it pays our costs - if we can achieve that, market share will follow automatically," Fischer said in an interview.
Since February, Equiduct has cut its costs by 25 percent while also reaching an agreement with its customers/owners to raise its trading fees by up to 20 percent, he said, adding that the company's fees are still lower than competitors' prices.
Fischer is also joint CEO of Borse Berlin, which runs Equiduct.
Under the new structure, no single stakeholder owns more than 25 percent of the Equiduct, which is aims its services at retail brokerage firms.
Jersey City, New Jersey-based firm Knight took a position in Equiduct in June 2010. A key challenge for new exchanges is attracting sufficient liquidity to attract new traders. Knight is one of the top liquidity providers in the U.S. market and its relationship with Equiduct gives it ready access to European retail brokerage firms.
"We see the European market as changing," Albert Maasland, CEO of Knight Capital Europe said in an interview. "Volumes are low, it's a tough retail environment, and Equiduct provides value in that environment," he said as to why Knight has maintained its investment in the trading venue.
Virtu Financial and Winterflood Securities also act as market makers on Equiduct.
Competition among multilateral trading facilities (MTFs) has been fierce in recent years since pan-European regulation opened the market to competition in 2007.
A lack of funds led to the closing of Spain's Plataforma Alternativa de Valores Espanoles last year in February, while Nasdaq OMX Group shuttered a pan-European MTF it operated, called Neuro, in April 2010 as the business failed to gain enough market share.
(Reporting By John McCrank in New York; editing by Andrew Hay)