MergerMarket: Aquis Exchange to complete GBP 8m fundraising by end of May, CEO says

May 9, 2013

Aquis Exchange, a newly established multilateral trading facility (MTF), is nearing the end of a second funding round ahead of a planned launch in October, CEO Alasdair Haynes said. A third funding round is scheduled once the exchange becomes operational.

The London-based MTF is looking to raise GBP 8m in exchange for a “substantial stake” having already secured an undisclosed amount of seed funding through high net worth individuals in October 2012, the CEO said. The ongoing round is targeting similar investors alongside strategic financial institutions, he noted, adding that it is heading towards being over-subscribed.

Management hopes to close the funding round at the end of May when user acceptance testing will then take place. This will be undertaken by a combination of investment banks, brokers and high frequency traders, Haynes said.

A third round of funding would look towards venture funds and private equity interest, Haynes said.

The company is in the process of applying for MTF status and hopes to receive FCA approval by Q3. It aims to take a share of the European equity markets away from incumbent exchanges and fellow MTFs such as BATS CHI-X and Turquoise.

Since the introduction of the Markets in Financial Instruments Directive (MiFID) in 2007, MTFs have taken market share away from local national exchanges such as London Stock Exchange [LON:LSE], NYSE Euronext [NYSE:NYX] and Deutsche Boerse [ETR:DB1].

MiFID opened the doors for enhanced competition within the EU trading services market.

Haynes previously headed up Chi-X, which merged with competitor BATS in 2011. The combined entity now has an average market share of around 25% of the European equity market with incumbent exchanges holding the lion share of volume. A small fraction of trades are executed on other MTFs. Aquis hopes to break this duopoly whereby more than 90% of equity trading in each individual country takes place on just two exchanges.

Aquis will adopt a new pricing model whereby users will be charged according to the message traffic they generate, rather than a percentage of the value of each stock they trade, Haynes said.

An exact pricing is yet to be finalised but is being negotiated with potential future users, Haynes said. Aquis’ technology has been built in house. Its low latency trading platform offers interoperability among European clearinghouses.