LSE Announces Joint Venture With Lehman Brothers

BY Jason Gorringe, Tax-News.com, London

30 June 2008

The London Stock Exchange (LSE) and Lehman Brothers on Thursday announced plans to create a pan-European MTF (multilateral trading facility) for the execution of non-display orders.

The MTF, to be named Baikal, will provide market participants with an "unrivalled trading service for European equities", according to the LSE, "being the first to combine an innovative dark liquidity pool with sophisticated algorithmic trading functionality".

Within the context of an evolving equities trading landscape, Baikal aims to address the growing complexity of order execution requirements by allowing buy-side and sell-side participants to trade larger orders in a trusted environment, thereby minimising market impact.

Baikal will be a neutral liquidity venue led by the London Stock Exchange and will offer the following key features, according to the LSE:

• Open, equal access to securities across 14 European countries with smart order routing to liquidity in at least 22 trading venues;
• An extensive suite of dynamic, liquidity seeking algorithmic trading strategies, which can be tailored to specific customer requirements and risk tolerance;
• Pioneering anti-gaming controls and world class market surveillance tools that will support the safe and secure execution of equity trades;
• Real-time post trade reporting included in the London Stock Exchange’s Infolect feed; and
• An efficient pan-European clearing and settlement solution with aggregated trade booking for Baikal-matched and smart order routed business.

Clara Furse, Chief Executive of London Stock Exchange, commented:

“The London Stock Exchange has an over-arching objective to improve market efficiency for the benefit of investors and issuers, and we will continue to innovate to promote that goal. Baikal provides an exciting opportunity for the market to transact certain types of business in European equities with the confidence of total pre-trade anonymity, alongside the efficient price formation of the electronic order books of exchanges, where the majority of equities across Europe are traded."

“We are delighted to be partnering with Lehman Brothers to create Baikal, which will draw upon their market leading expertise in algorithmic trading strategies and investment in new anti-gaming technology. In addition, we actively welcome the participation of other members of the sell-side as well as buy-side community in making Baikal a success in bringing down the cost of investment in European equities.”

Jeremy Isaacs, Chief Executive Officer, Lehman Brothers, Europe, Middle East and Asia-Pacific, added:

"Lehman Brothers is committed to providing state-of-the-art solutions to meet the increasingly sophisticated needs of our clients. We were the first investment bank in Europe to offer direct access to our own dark liquidity pool. Baikal represents a substantial evolutionary step in providing market participants with the ability to access and utilise efficiently dark liquidity in European equities, and we anticipate that Baikal will be the premier platform for addressing the growing complexities of the market place."

In order to ensure that Baikal delivers solutions that appeal to all types of market participants, it is intended that a Strategic Advisory Committee and working groups will be operational from Q3 2008, further details of which will be announced shortly.

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