Financial News: Aquis poised for debut

November 25, 2013

Aquis Exchange, Europe’s newest alternative equity market, is set to launch this week with 11 customers, in a bid to shake up trading tariffs across the region.

 

Aquis, which was founded by former Chi-X Europe chief executive Alasdair Haynes, will start trading UK, French and Dutch stocks from tomorrow with initial clients comprising brokers, proprietary trading firms and market makers. The venue hopes to grow its member base to around 30 by the end of the first quarter in 2014.

The market will be the first in Europe to use a subscription-based pricing tariff. After an initial price promotion, users can either pay £2,000 per month to send an average of 25,000 messages to the Aquis system per day, or £10,000 for the ability to send an unlimited number of messages, subject to a fair usage policy.

A message can include a request sent to Aquis to buy or sell a stock, modify an existing order or cancel an order.

Aquis’ fee structure is a departure from the maker-taker pricing used by many of Europe’s alternative trading venues. The maker-taker model charges users for orders that remove liquidity from an order book, while offering rebates for orders that add liquidity.

Haynes told Financial News: “Our revenues are directly related to the process costs of our business – the more you trade, the more you pay. Current exchange fees take a percentage of the value of trades, which means their cost base is not linked to revenue streams.”

The new venture will also aim to build revenues by charging for market data, starting from around two years after launch, and by selling proprietary trading technology. Aquis is in discussions with a number of potential customers having already sold a trading system to Quote Africa, a market operator that has a number of licences to run exchanges across Africa.

Haynes said the Aquis system, which includes integrated surveillance capabilities and can trade a range of asset classes, would aim to sell technology to new markets that are expected to launch after the finalisation of new rules in the second version of the Markets in Financial Instruments Directive. This includes the creation of a new type of trading venue category known as the organised trading facility, which will be used for markets that will offer trading in OTC derivatives under G20-led swap market reforms.

Aquis’ employees own 25% of the firm with the Warsaw Stock Exchange also holding a 30% strategic stake, which it bought for £5 million last August. The remaining 45% is owned high-net-worth individuals – former Barclays executives Bob Diamond and Rich Ricci have been linked with backing the firm.

Haynes said: “Many markets are run with a consortium structure and can be subsidised as loss-making businesses for some time. We have raised £12.5 million, which will give us a good 18 months to gain traction. We will know in this time whether the market wants subscription pricing or not.”

Anish Puaar