London Exchange in Talks to Buy Alternative Platform

LONDON — The London Stock Exchange said Thursday that it was in exclusive talks to link with the pan-European alternative trading system Turquoise in an attempt to regain market share and expand abroad.

Turquoise, which was set up by Morgan Stanley, Goldman Sachs and seven other investment banks, put itself up for sale in August after it said that it had achieved its goal of increasing competition and efficiency of the European trading environment. But alternative trading platforms like Turquoise, which opened in August last year, also struggled to make a profit because of costly technology and declining trading volumes.

London’s stock exchange, Europe’s biggest according to the value of companies whose shares it trades, said the talks “may lead to a transaction” but declined to give more details.

The London exchange’s chief executive, Xavier Rolet, a former Lehman Brothersexecutive who took over in May, pledged to focus on increasing market share lost to smaller alternative trading platforms mainly because of its higher fees and slower technology. He took steps to reduce costs, improve trading technology and considered expanding abroad or into other financial products.

Two weeks earlier, the London exchange agreed to buy MillenniumIT, a Sri Lankan technology services company, for $30 million.

Mr. Rolet’s predecessor, Clara Furse, fought hard to keep the stock exchange independent as she watched rivals like Nasdaq and Euronext form international alliances that increased competition.

Turquoise would give the London stock exchange access to 15 countries in Western Europe and help it compete with Deutsche Börse, NYSE Euronext, Nasdaq OMX and Chi-X, the platform set up in early 2007 by the electronic broker Instinet. UBS, the bank picked by Turquoise to help it find a buyer, sent sales documents to the biggest exchanges.

But some analysts said a transaction was difficult because many of the exchange’s orders come from its shareholding banks, which may stop using the platform once it is sold, limiting the attractiveness to any new owner unless the banks keep a stake in the company.

http://www.nytimes.com/2009/10/02/business/global/02exchange.html?partner=rss&emc=rss