The London Stock Exchange is attempting to fend off new rivals by slashing fees and launching a new service for traders.
The London Stock Exchange (LSE) announced it will slash the time to complete a trade from six milliseconds to three as the exchange completes an upgrade of its 14-month old TradElect platform.
The exchange has also launched a server hosting service for investment banks to enable traders to reduce network latency and further cut the time to complete a trade. The Exchange Hosting service allows banks to move their servers into the exchange's own data centre next to the LSE's Tradelect trading platform. This shaves milliseconds off the time it takes to complete trades as it eliminates network latency, the exchange claimed.
In a statement, David Lester, chief information officer at LSE, said: "This new service underlines our commitment to reducing latency at each stage of the trading cycle and facilitating the structural shifts in trading patterns that are driving growth on our markets. The service will allow customers to host their algorithmic engines next to our core TradElect execution engine and aid further liquidity generation and market efficiency."
Phase one of the service is now live, and LSE claims it could cut network latency on the exchange by 1.5 milliseconds. The second phase of the service, which involves introducing more servers and "a number of supporting value add services", will be live in February 2009, the exchange has said.
The exchange has been upgrading TradElect to bolster its capacity and latency. The LSE said: "In September, current capacity on TradElect will initially double to 10,000 continuous messages per second. In October, it will double again to around 20,000 continuous messages a second and end-to-end execution latency on TradElect will be reduced by 50 percent from six milliseconds to three milliseconds."
In a separate announcement, the exchange has also cut the fees it charges traders. This is seen as an attempt to undercut new competition that have sprung up since the introduction of the Markets in Financial Instruments Directive (MiFID) last November. MiFID shook up the finance sector by removing a rule that said deals had to be done on local exchanges, which led to the launch of rival trading facilities that boasted higher speeds and lower fees.
One such new entrant is Turquoise, which is owned by nine investment firms and became fully operational on 29 August.