Interagency broker Instinet is to launch a new automated trading system for European equities dubbed Chi-X.
Operating as an independent subsidiary of Instinet, the Chi-X platform will launch later this year in conjunction with a consortium of financial firms. The operation has been authorised by the FSA as a securities firm operating as an Alternative Trading System (ATS) and MTF (Multi-Lateral Trading Facility under MIFID) and passported into all relevant European markets.
The system is based on the firm's existing Continuous Block Cross (CBX) platform, which is currently used in the US domestic equity market. It has been redeveloped for the European market to help sell side firms address the best execution requirements stipulated by the EU's forthcoming MiFID directive. Instinet boasts internal benchmark tests that show the new platform to potentially be 10 times faster and significantly cheaper than Europe’s traditional equity exchanges.
The VC-owned brokerage has teamed with Fortis to develop low-cost clearing and settlement services for the new facility.
Instinet Chi-X director Peter Randall has vowed to significantly undercut the clearing and settlement fees currently charged by the major European clearing houses and custodians.
"The total cost of trading equities in Europe is significantly higher than other major markets competing for investor capital. Europe needs competition, not consolidation as this leads to innovation, more liquidity and lower costs," he says. "Chi-X will provide institutions with a true high speed, low-cost alternative for trading European equities, and our partnership with Fortis, who offer compression, netting and significantly lower costs, will ensure competition throughout the entire equities trading process."
The new market complies with the open access princicples espoused by the European Commission, says Randall, in that it allows for interoperability with other providers of central market infrastructure, be they central counterparties (CCPs) or central securities depositories (CSDs).