Boston Stock Exchange, Wall Street banks to launch equities e-trading venture

Boston Stock Exchange, Wall Street banks to launch equities e-trading venture

The Boston Stock Exchange (BSE) has confirmed it is teaming with Wall Street banks Citigroup, CSFB, Fidelity Brokerage Company and Lehman Brothers to launch an all-electronic equities trading market next year.

Financial terms of the deal were not disclosed but according to a Reuters report, which cites source familiar with the situation, the total value of the deal is about $50 million to $55 million. The four banks are rumoured to be investing in the new exchange for around $20 million each for a stake of about 36%, with BSE taking the rest.

In a statement BSE says the new exchange, which is called the Boston Equities Exchange (BeX), will use technology from Atos Euronext Market Solutions and Citigroup subsidiary Lava Trading.

Mike Curran, BSE chairman and CEO, says BeX "will provide our clients with automated tools and a cost structure that will enable us to meet the needs of retail and institutional investors, while managing financial and regulatory risk".

Curran told journalists that the electronic equities exchange was the next logical step following the launch of its electronic options exchange last year. He says he is aiming at market share of about five to seven per cent for BeX in the first three to five years after launch.

In a statement, Mark Haggerty, EVP of Fidelity Brokerage Company, says:"The creation of the BeX will provide greater choice and competition among markets, which is vital to keeping trading costs low and ensuring quality executions."

The new BeX services will be deployed in a series of phases over the next 12 to 15 months, with the first phase expected to be completed in early 2006.

Rumours of the venture first surfaced last week when the New York Times reported that the four banks were in advanced talks about setting up an electronic exchange.

Confirmation of the deal comes a week after the Philadelphia Stock Exchange (PHLX) said a further four banks were buying a combined 25% equity stake in its business for a total of $19 million. Two of the four banks investing in PHLX - Citigroup and CSFB - are also investing in the new Boston exchange.

Both moves are seen as an attempt by regional exchanges in the US to take on the New York Stock Exchange and Nasdaq, which are both merging with ECNs.

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