Nasdaq Europe has forged a partnership with the Berlin Stock Exchange to create a direct link with the German equities markets. The move will see the two markets swap a significant percentage of their share capital.
Non-German markets have historically found it difficult to attract significant order flow from German investors who tend to conduct their international trading through domestic exchanges, due to culture, cost and legal provisions.
The partnership with Nasdaq Europe allows German investors to trade on a foreign market under domestic legislation, making it just as cost effective for the German retail public to trade on Nasdaq Europe as any domestic market.
Michael Sanderson, CEO of Nasdaq Europe, says: "Having launched our trading platform in June, we are proud to become the first non-domestic market to form a direct link with Germany's equity markets."
Under the terms of the agreement, Nasdaq Europe will pool liquidity with the Berlin Stock Exchange by enabling German specialists to become market makers on the European exchange in selected stocks. Market makers compete for orders by entering quotes (price offers). Best bid offers will automatically be imported to the order book of the relevant market specialist. The agreement covers around 200 of the most frequently traded stocks on the German markets.
At a later date, it is intended that Nasdaq Europe's ETS will be implemented as the joint trading system at Berlin Stock Exchange. This will link ETS directly with Xontro, the shared technical order routing system for all German regional exchanges. Through Xontro, more than 100 members of the Berlin Stock Exchange would be able to access the ETS trading platform via their existing infrastructure thereby avoiding having to make any significant new investment in IT systems. Settlement and clearing will be carried out through Nasdaq Europe.
The partnership also includes each market taking a significant minority stake in the other's share capital. A representative from Nasdaq Europe, Michael Sanderson has been appointed to serve on the board of the Berlin Stock Exchange while Dr Jörg Franke will represent the Berlin Stock Exchange on the Nasdaq Europe board.