Chi-X Europe

Chi-X Europe
Type	Multilateral Trading Facility
Location	London, United Kingdom
Founded	2007
Owner	Current: Consortium Proposed: BATS Global Markets (subject to Competition Commission review)
Key people	Chairman: John Woodman CEO: Peter Randall (2007 – Feb 2009) CEO: Alasdair Haynes (Dec 2009 – present)[1]
Currency	Euro

Chi-X Europe is a London-based, order-driven pan-European equity exchange, or Multilateral Trading Facility (MTF). It is an alternative exchange and trades equities that are listed on primary exchanges such as the London Stock Exchange, Frankfurt Stock Exchange, Euronext and OMX. Chi-X's aim is to be a low-cost trading facility, undercutting other exchanges for price and speed.^[2][3]

Chi-X Europe indicates that it offers trades on more than "1,200 of the most liquid stocks across 23 indices in 15 European markets." They provide both a visible order book and a non-displayed order book, which the company refers to as Chi-Delta .^[2]

The name Chi-X is derived from the Greek letter Chi, written Χ, symbolising the crossing of the two sides of a trade.^[4]

History

Established in 2007 by Instinet, which is itself a subsidiary of Nomura Holdings, Chi-X Europe is today owned by a consortium of major global financial institutions including BNP Paribas, Citadel, Citigroup, Credit Suisse, Fortis, GETCO Europe Ltd, Goldman Sachs, Instinet Holdings, Merrill Lynch, Morgan Stanley, Optiver, Société Générale and UBS.^[2][5] Chi-X Europe became the first multilateral trading facility that launched in anticipation of the European Union's November 2007 Markets in Financial Instruments Directive (MiFID), which paved the way for the introduction of alternative trading venues in Europe.^[6][7]

In February 2009, founding Chief Executive Officer Peter Randall quit Ch-X Europe unexpectedly and was replaced by Alasdair Haynes in December 2009. Randall reportedly left for "personal reasons". Citadel LLC named Randall as chief executive of Equiduct Systems on 18 December 2009. Equiduct is an MTF, similar to Chi-X.^[8][9]

Also in February 2009, The Wall Street Journal reported that "Chi-X performed 9.1% of trades in the 10 largest European markets, including 15% of trades in FTSE 100 stocks" and also that "In London, Europe's main equity center, Chi-X Europe is now trading nearly 15% of U.K. equities, a performance that has contributed to the London Stock Exchange's market share falling below 75% for the first time."^[9]

In analysing market conditions for MTFs in February 2009, The Wall Street Journal said: "MTFs are facing an uncertain future... trading activity slowed drastically in November [2008], as hedge funds and investment banks, which had exploited the technological advantages of MTFs for their complex trades, withdrew from the market... Traditional exchanges typically have a spread of interests... they generally have derivatives and bond trading, post-trading services and data and technology units to keep them buoyant when trading slows... The MTFs, by contrast, rely exclusively on equity trading for revenue, a problem compounded by their determination to offer lower fees than the exchanges, which means they also are operating on thin margins... The consensus among their customers is that not all the MTFs will survive the next six months."^[9]

In December 2009, Chi-X Europe had secured £12 million (US$17 million) in new funding from its existing shareholders. The arrangement reduced the stake of its majority owner, Instinet Europe, part of Instinet International.^[9]

In February 2010, Chi-X Europe's chief operating officer Hirander Misra quit suddenly the firm to "pursue other interests". Misra had helped guide the company along with Randall, from its start until it became the second-largest market by share.^[8]

On Wednesday, 22 April 2009, Chi-X announced opening a dark pool of liquidity, designated Chi-Delta.^[10] The company reached profitability in 2010.^[11] On 23 August 2010 the company announced that an unnamed third part had expressed interested in buying the organisation.^[11]

By September 2010, over 25% of all trading in FTSE 100 stocks was taking place on Chi-X Europe^[12] along with over 20% in trading of AEX index,^[13] DAX^[14] and BEL20^[15] stocks.

In February 2011, BATS Global Markets agreed to buy Chi-X Europe for $300 million ^[16]. BATS announced in April 2011 that CEO Mark Hemsley will replace Alasdair Haynes at the combined company^[17].

In June 2011, The Office of Fair Trading referred the anticipated acquisition by BATS Trading Limited of Chi-X Europe Limited to the Competition Commission for further investigation to determine whether a substantial lessening of competition is probable as a result of the anticipated merger. The Competition Commission is expected to report by 2 December 2011.^[18]

Regulatory environment

Chi-X Europe is authorised by the Financial Services Authority (FSA) to operate a multilateral trading facility (MTF), as defined under MiFID, for the trading of pan-European securities. Chi-X Europe meets the same level of regulatory standards as traditional exchanges and receives the same level of supervision as explained by the FSA: "we aim to ensure that Multilateral Trading Facilities (MTFs) with a similar market impact or market share as Regulated Markets (i.e. exchanges) receive the same level of supervision as those markets, even though MTFs sit under a slightly different legal regulatory regime."^[19]

See also

• Turquoise (trading platform)
• Chi-X Global - a separately operated and owned provider of alternative trading venues also founded by Instinet.

References

1. ^ Global Investor (December 2009). "Chi-X Europe names Alasdair Haynes CEO". http://globalinvestormagazine.com/Article/2349038/AssetServicing/26302/Chi-X-Europe-names-Alasdair-Haynes-CEO.html. Retrieved 8 September 2010. 
2. ^ ^{a b c} Chi-X Europe (2010). "Who We Are". http://www.chi-xeurope.com/home/who-we-are.asp. Retrieved 8 September 2010. 
3. ^ Chi-X Europe (2010). "Location". http://www.chi-xeurope.com/contact-us/location.asp. Retrieved 8 September 2010. 
4. ^ "About Chi-X APAC". http://www.chi-x.com/apac/. 
5. ^ Chi-X Europe (2010). "Shareholders". http://www.chi-xeurope.com/who-we-are/shareholders.asp. Retrieved 8 September 2010. 
6. ^ "Directive 2004/39/EC". Official Journal of the European Union. 2004. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=CELEX:02004L0039-20060428:EN:NOT. Retrieved 20 March 2008. 
7. ^ "Directive 2008/10/EC". Official Journal of the European Union. 2008. http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2008:076:0033:0036:EN:PDF. Retrieved 20 March 2008. 
8. ^ ^{a b} Sukumar, Nandini (23 February 2010). "Chi-X Europe’s Misra Quits for ‘Other Interests’ (Update1)". Bloomberg Businessweek. http://www.businessweek.com/news/2010-02-23/chi-x-europe-coo-misra-resigns-to-pursue-other-interests-.html. Retrieved 8 September 2010. 
9. ^ ^{a b c d} Jeffs, Luke (22 February 2009). "Chief of Chi-X to Leave - Randall's Departure Follows Fund Raising; Successor Not Named". The Wall Street Journal. http://online.wsj.com/article/SB123568380289586651.html. Retrieved 8 September 2010. 
10. ^ Grant, Jeremy (22 April 2009). "Chi-X to offer dark alternative for Europe". Financial Times. http://www.ft.com/cms/s/667979da-2e9f-11de-b7d3-00144feabdc0,Authorised=false.html?_i_location=http%3A%2F%2Fwww.ft.com%2Fcms%2Fs%2F0%2F667979da-2e9f-11de-b7d3-00144feabdc0.html%3Fnclick_check%3D1&_i_referer=&nclick_check=1. Retrieved 8 July 2009. 
11. ^ ^{a b} Chi-X Europe (2010). "Statement from Ch-X Europe". http://www.chi-xeurope.com/latest-from-chi-x/offer-statement-23-aug-2010.pdf. Retrieved 8 September 2010. 
12. ^ Fidessa group plc (September 2010). "FTSE 100 report for week ending 10 Sep 2010 (FFI 2.41)". http://fragmentation.fidessa.com/stats/index/UKX.html. Retrieved 15 September 2010. 
13. ^ Fidessa group plc (September 2010). "AEX report for week ending 10 Sep 2010 (FFI 1.98)". http://fragmentation.fidessa.com/stats/index/AEX.html. Retrieved 15 September 2010. 
14. ^ Fidessa group plc (September 2010). "DAX report for week ending 10 Sep 2010 (FFI 1.89)". http://fragmentation.fidessa.com/stats/index/DAX.html. Retrieved 15 September 2010. 
15. ^ Fidessa group plc (September 2010). "BEL 20 report for week ending 10 Sep 2010 (FFI 1.84)". http://fragmentation.fidessa.com/stats/index/BEL20.html. Retrieved 15 September 2010. 
16. ^ "Bats Agrees to Buy Chi-X Europe as Competition Grows". http://www.businessweek.com/news/2011-02-18/bats-agrees-to-buy-chi-x-europe-as-competition-grows.html. Retrieved 17 April 2011. 
17. ^ "Bats Europe CEO to run Bats Chi-X, Haynes departs". Reuters. 12 April 2011. http://www.reuters.com/article/2011/04/12/mpbats-chief-executive-idUSLDE73B1DV20110412. Retrieved 17 April 2011. 
18. ^ Office of Fair Trading (June 2011). "Press releases 2011 - OFT refers equity trading merger to the Competition Commission". http://www.oft.gov.uk/news-and-updates/press/2011/67-11. Retrieved 11 July 2011. 
19. ^ Financial Services Authority (May 2010). "The FSA’s markets regulatory agenda". http://www.fsa.gov.uk/pubs/other/markets.pdf. Retrieved 14 October 2010. 

External links

• Official website