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LSE trading fees under scrutiny

04 May 2010  |  6518 views  |  0 london tower bridge

Executing a UK equity trade on the London Stock Exchange is significantly more expensive than on Chi-X or Bats Europe, with over 80% of the cost coming from trading fees, according to research commissioned by Euroclear.

Euroclear commissioned consultancy Oxera to examine the relative proportions of trading and post-trading costs involved in a transaction after LSE chief Xavier Rolet asked the clearer to make changes to its fees for trade netting services.

With the London bourse rapidly losing market share to new low-cost entrants such as Chi-X and Bats Europe since the introduction of MiFID it wanted to find new ways to reduce costs for customers.

Euroclear eventually agreed to tweak its system in a move the LSE claimed would save its customers around £10 million over the next year but also decided to investigate the proportion of overall costs that post-trade services make up.

It asked Oxera to look at the specific costs incurred by a user with the profile of a large-volume broker using the three venues and their post-trade services providers on the basis of March prices.

The figures show that the cost of using the LSE together with LCH.Clearnet and Euroclear UK & Ireland is 28.5 pence per transaction. For both Bats Europe and Chi-X with EMCF and Euroclear UK & Ireland the figure is just 7.3 pence.

What's more, of the 28.5 pence cost for using the LSE, 83% of this is made up of trading costs, with just 17% attributable to post-trading services. In contrast, on the other two platforms, trading costs account for 41% of the total, and post-trade for 54%.

In a statement, Euroclear says it commissioned the study "to share a credible, independent view of the true cost of post-trade services for UK equity trades conducted on the London Stock Exchange and two active MTFs. We and our clients could not reconcile the London Stock Exchange's statements that post-trade costs represented two-thirds of the cost of an LSE transaction."

The LSE dismissed the report, stating: "To the extent that this report is neither up to date nor in line with client feedback, it would seem to be a rather pointless and self-indulgent exercise. We will continue to take the word of our clients on this matter and will continue to promote lower costs across all parts of the trade process."

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