February 3, 2016

A start-up European share trading venue is aiming to reboot its fortunes by banning aggressive high-speed trading from its platform.

London-based Aquis Exchange on Wednesday told users it would bar traders who use predatory tactics to try to move prices and take advantage of orders placed by investors. The rules will be applicable from Monday, it said in a circular.

It hopes the move will be a European-style echo of IEX, the US share trading venue that aims to discourage certain types of trading on its venue by using a “speed bump”.

The rule is aimed at clamping down on so-called “momentum ignition strategies” that try to kick-start rapid price movement by — for example — initiating a series of rapid-fire buy or sell orders that are then cancelled. The techniques used to achieve this range from legitimate trading to illegal.

Alasdair Haynes, chief executive, said the move had been prompted by a decline of liquidity on his venue last year following the introduction to his market of two aggressive high-frequency trading companies.

“We’ve been able to watch the impact of what happens. Posted liquidity gets damaged by this type of trading,” he said. Of the new rule, he added: “It sends aggressive predatory trading away from the platform.”

Aquis hopes its policy will help lure big traders that have so far shied away from the venue. Launched two years ago, it had hoped to shake up its competition by offering a mobile phone-style “pay for what you consume” data fee for traders.

It won backing from former Barclays banker Rich Ricci and the Warsaw Stock Exchange in a fundraising two years ago. However, to date it has garnered just 0.6 per cent of the European share trading market.

Mr Haynes was previously chief executive of Chi-X Europe, a venue set up to benefit high-speed traders. He said the move was “not anti-HFT. There’s plenty of HFT firms who use high-frequency to supply liquidity.”

He added Aquis was doing by regulation what “IEX is doing by technology”. IEX’s application to become a regulated stock exchange has divided the market and generated more than 300 comment letter to US regulators. At its heart is a controversial “magic shoebox” — a 350-microsecond delay or latency on its system, via 38 miles of coiled fibre optic cable in a box.

Aquis has received approval from the Financial Conduct Authority to make the step, the company confirmed.

Philip Stafford