Nyse Euronext to develop new pricing system to see off Chi-X threat

Nyse Euronext to develop new pricing system to see off Chi-X threat

Nyse Euronext is to develop a trading engine capable of quoting stock prices to four decimal places in a bid to head off competition from Instinet Chi-X, which is gaining market share in Dutch and German stocks.

The first batch of statistics released by Chi-X indicates that the new alternative trading platform is succeeding in attracting a significant minority of trading in the largest shares listed on the Dutch and German stock exchanges.

On August 29, Chi-X had captured 44% of trading in Philips, 29.87% in ING, 27.34% in Dutch Shell and 23.83% of Fortis.

Instinet is attributing its early success to finer pricing and its low-latency trading system, which the firm claims is up to ten times faster than traditional equity exchanges.

Currently operating as an ATS, Chi-X will switch to a multilateral trading facility in November, when new European trading rules designed to encourage wider competition are introduced under the Markets in Financial Instruments Directive (MiFID).

In an interview with the Financial Times, Roland Bellgarde, head of European cash equities at Nyse Euronext claimed the only reason Chi-X could quote finer prices is that its system operates to three decimanl points, rather than the conventional couple of pips used by Euronext Amdsterdam.

"In January, following completion of a consultation exercise, we will move to four decimal places, not just three," he told the FT.

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