LSE to cut trading fees; offers £250 million cash incentive to shareholders

LSE to cut trading fees; offers £250 million cash incentive to shareholders

Under siege from Nasdaq, the London Stock Exchange is cutting some of its trading charges in its latest attempt to fend off its US rival and the threat of competition from large investment banks.

The changes will be phased in between April and November and include a cut in the charge for certain types of trading on the SETS platform, as well as a volume discount scheme.

LSE says the new fee structure will cut the average charge per trade on SETS from £1.36 to £1.23 per trade.

"Lower fees stimulate volume growth and increase liquidity, which, in turn, reduce overall transaction costs," says the exchange in a statement.

Furthermore, the LSE says a discounted trade reporting tariff will support the launch of its new MiFID European trade reporting service, which is being introduced to combat the threat of alternative trading and reporting systems that will spring up after the introduction of the EU's Markets in Financial Instruements Directive (MiFID).

The LSE says the year will also see the launch of TradElect, its new trading platform, in the second quarter.

The exchange's statement comes just days after Nasdaq extended the deadline for its £2.7bn hostile takeover bid.

Nasdaq formally launched its £2.7bn hostile offer for the LSE in December after its first two approaches were rebuffed by the UK market operator earlier in the year.

The US exchange has subsequently accused the LSE of failing to share the benefits of its growth with its customer base and of failing to recognise "new competitive threats" such as Project Turquoise, the dealer-backed consortium which is looking to build a rival share trading and reporting platform.

Update
In a bid defence circular released Thursday, the LSE offers shareholders a £250 million sweetener in the form of a share buyback programme. The circular also includes the Exchange’s SETS forecast for financial year 2008 of at least 480,000 average trades per day, an increase of at least 180 per cent.

Chris Gibson-Smith, LSE chairman, states: "Your board remains open to a strategic combination and the circular explains that shareholders and customers would benefit from a transaction which properly recognises the value of the Exchange Group and its markets. Shareholders should not be persuaded to sell their shares below their true value.”

Read the full circular:» Download the document now 1.8 mb (Adobe Acrobat Document)

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