European exchange price war looms as Virt-x cuts tariffs

European exchange price war looms as Virt-x cuts tariffs

SWX Group, the Swiss Stock Exchange, is cutting tariffs for trading international equities on screen-based exchange Virt-x, in a move that could presage a wave of price competition among European exchanges ahead of the introduction of the EU's Markets in Financial Instruments Directive (MiFID).

SWX says trading tariffs will be substantially reduced across all Swiss, pan-European blue chip trading and ETFs as of 1st January 2007. In total, these measures will equate to an average annual saving of 15% for users of the virt-x platform.

Furthermore, from 1st October 2006 to the end of the year no fees will be charged in all segments to which the new lower costs apply. As a result, members will benefit from total savings estimated at £13m (SFr30m), says SWX.

Jürg Spillman, head of the group executive committee, SWX, says: "Our users will benefit in the form of cost savings both in the short term via the three month fee waiver and on an ongoing basis through reduced fees and simplification of our tariff structure."

The move could force rival exchanges to make similar price cuts ahead of the introuction of MiFID in November 2007, which aims to increase competition between exchanges in order to cut trading costs for customers.

In the US, Nasdaq recently saw its share of trading of Nyse-listed stocks increase due partly to reduced tariffs on its electronic trading platform. The shift in liquidity implied that US trading firms had begun to alter their investment strategies in anticipation of new best execution trading rules that favour electronic exchanges.

Earlier this year SWX's central counterparty SIS x-clear inked a deal to provide clearing services for the London Stock Exchange and vowed to undercut fees charged by LCH.Clearnet, previously the sole clearing provider for the London exchange's equity business. SIS x-clear is expected to start clearing LSE trades in the first quarter of next year.

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