LSE to launch new 'hybrid' market for mid-cap stocks

LSE to launch new 'hybrid' market for mid-cap stocks

The London Stock Exchange has confirmed plans to extend the Sets electronic order book to mid-cap stocks currently traded over the Seaq quote-driven trading system.

The new service, dubbed Setsmm, is being pitched as a hybrid system combining an electronic order book with the added support of continuous liquidity provision from committed market makers.

The move follows widespread discussions with market participants initiated by the Exchange last year. While Sets' market share of eligible equity trading by value has increased from 48% to around 66% in the five years since its launch, trading in mid-size companies over Seaq had deteriorated significantly.

Clara Furse, chief executive at the London Stock Exchange, says: "Setsmm will increase the number of securities traded on Sets. The benefits will include tighter spreads, lower transaction costs, greater transparency and improved liquidity for the FTSE 250 stocks."

Trading over Setsmm will be supported by a central counterparty facility and settlement in Crest or Euroclear Bank.

The Exchange says it will also introduce a mechanism for order book participants to enter large orders onto the book while revealing only a portion to the market. These 'Iceberg' orders will be eligible for Sets as well as Setsmm and will allow users to work larger orders through the book with reduced market impact, says Furse.

The Exchange is aiming to launch both services in September 2003.

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