LSE launches last-minute defence before Mifid launch

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LONDON – The London Stock Exchange (LSE) upgraded its main trading platform on the eve of the implementation of the Markets in Financial Instruments Directive (Mifid).

Release 2.0, the updated version of LSE’s electronic trading platform TradElect, has improved processing speed by 40% and system capacity by 70%. It also has added functionality that allows the exchange to offer market users a full suite of Mifid-compliant solutions, the LSE claims.

As a result of the upgrade, the exchange’s central order book can now execute 4,200 trades a second, compared with 3,000 on the previous technology, each at around 6 milliseconds, compared with 10 milliseconds on the earlier version.

The new functionality includes the introduction of market making across all liquid securities on the Exchange’s SETS order book as an on-Exchange alternative to systematic internalisation as well as limit order display in all UK main market securities.

A Pan-European trade reporting service for off-book executions has also been introduced, covering approximately 5,000 securities. The service will cover both on exchange (ie, under the exchange’s rules) and OTC (ie, unregulated) trade reports.

“In its four months since launch, TradElect has already demonstrated its capabilities with the top 10 busiest days by volume and seven of the top 10 busiest days by value traded taking place during the period. Following this upgrade, TradElect now enables market participants to execute trades in around 6 milliseconds and has the ability to handle 4,200 orders a second. Moreover, we have added new functionality to accommodate a range of Mifid-specific solutions,” said David Lester, the chief information officer at the LSE.

With the upgrade, the exchange aims to provide a better service than any other exchanges’ launches following the opening up of the market by Mifid post-November 1. Although Project Turquoise, the multi-lateral trading facility, will not be operational until mid-2008, Boat, the trade reporting system run by a banking consortium, is offering services from November 1 and has also offered to provide data free for a limited period as an introductory offer.

Turquoise has high ambitions, however, and Eli Lederman, the Morgan Stanley managing director named a week ago to head the MTF stated recently in an interview that from the outset, Turquoise aims to attract large volumes to gain a “double-digit market share”.

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