Share trading may slow in volatility lashback: Chi-X

‘We could see a lengthy period of reduced volumes, sleepy markets, in reaction to the volatility we have seen,’ Peter Randall told Reuters in an interview on Thursday.

‘This means that (transaction) costs will come ever more into focus, which is good for us,’ said Randall, whose company lives almost entirely off the explosive growth seen in computer-programme-driven, or so-called algorithmic, trading.

Chi-X Europe, part of Japan's Nomura Holdings, was launched in spring 2007, sparking price competition in an industry long dominated by incumbent national stock exchanges such as Britain's London Stock Exchange (LSE), Germany's Deutsche Boerse

and NYSE Euronext, which runs the Paris, Amsterdam, Brussels and Lisbon bourses.

‘We have been able to offer clients access to better prices at lower costs,’ Randall said. ‘Investors are the winners.’

On Wednesday, when major central banks cut interest rates in a move aimed at restoring confidence in battered financial markets, turnover on Chi-X hit a one-day record of 7.7 billion euros ($10.54 billion), he said.

Chi-X Europe offers electronic order book trading as well as clearing and settlement for over 700 stocks and exchange-traded funds (ETFs) in more than 10 countries.

In the third quarter, the number of trades on Chi-X Europe more than doubled from the previous quarter to 26.3 million while turnover -- the value of the securities traded -- grew 86 percent to 246.3 billion euros.

PROFITABLE OPERATION

In the first quarter, Chi-X-Europe's turnover was 74 billion euros and the company, which has 27 staff, was loss-making but near break-even. It has become profitable since, Randall said.

‘We made money in September and we are making money this month.’

More than one-fifth of all trading in British FTSE 100 shares was handled by Chi-X Europe, which has also reached double-digit market shares for trading in stocks belonging to the Dutch AEX, 18 percent, the French CAC 40, 16 percent, and Germany's DAX, 15 percent.

‘Our market share increased steadily this summer,’ Randall said, adding that his company had not detected any adverse impact from the full-scale start last month of Turquoise, another alternative trading platform for European cash equities sponsored by a group of top US and European banks.

‘The pie is getting bigger but our slice of the pie is getting bigger too,’ the Chi-X Europe CEO said.

The company aims ‘to grow market share across the whole of Europe,’ he said. Of Europe's big markets, Chi-X still lacks a presence in Italy and Spain.

‘We will go live in Italy on Friday,’ Randall said. Chi-X Europe would initially trade five Italian stocks, expanding its offering to cover all MIB-30 stocks in about two weeks.

Asked about potential threats to Chi-X, Randall said: ‘That the major exchanges rarely get around to restructuring themselves ... so far they are just huge great dinosaurs lumbering around.’

‘It's almost a delicious dilemma. We are delighted that we haven't seen anything but at the same time frightened about what could be coming,’ he added.

The LSE, Deutsche Boerse and other traditional exchanges have cut fees this year.