EDX London will combine the strength of London Stock Exchange's global equity market offering and expertise, with OM's flexible technology and experience in equity derivatives. Initially, EDX London's business will be built around the Scandinavian equity derivatives business of OM's London subsidiary, OM London Exchange. EDX London will take responsibility for the operation of this business, expand the product range and seek to create new business lines.
Part of EDX London's initial focus will be on the development, in conjunction with London Clearing House (LCH), of an over-the-counter (OTC) equity derivatives trade confirmation and clearing service for wholesale market participants, which will provide capital and operational savings. This will reduce the cost and risk of conducting OTC business and is a facility not currently available for the growing OTC equity derivatives market in London. This service will be developed in close collaboration with the participants in this market.
EDX London will join a broad trading community, comprising the existing memberships of Stockholmsbörsen, London Stock Exchange and the Scandinavian exchanges that are already linked to OM London Exchange. In addition to OM London Exchange's 84 member firms, London Stock Exchange's 292 member firms will be provided with access to EDX London.
EDX London will use OM's CLICK™ exchange technology platform together with OM's SECUR™ clearing technology platform. Separately, an agreement has been reached for London Stock Exchange to use OM's CLICK™ to enhance the growth of its recently launched covered warrants market by providing additional IT systems flexibility and scalability.
EDX London will immediately be included in OM's global community of technology customers (which includes American Stock Exchange, Athens Derivatives Exchange, the Australian Stock Exchange, Borsa Italiana, Hong Kong Exchanges and Clearing, International Securities Exchange in New York, and the SFE Corporation in Sydney), and aims to build business relationships and exploit synergies with members of that community.
In due course, EDX London will seek to build on the order-book sharing arrangements which OM London Exchange already has in place, in co-operation with a number of other markets. From the outset, the network will consist of EDX London and Stockholmsbörsen, Oslo Börs and Copenhagen Stock Exchange, members of the NOREX Alliance.
Welcoming the new initiative, Clara Furse, Chief Executive of London Stock Exchange, said: "This initiative with OM represents an important business opportunity for the Exchange. In collaboration with OM and LCH, we will be providing the growing equity derivatives markets in London with new products and services, which will reduce risk and cost. We are pleased to be associated with OM's highly-regarded derivatives technology and expertise, and look forward to being able to develop an international equity derivatives market around their network of clients."
Per E. Larsson, President and CEO of OM, added: "The formation of EDX London together with London Stock Exchange, Europe's leading equity exchange, creates an exciting opportunity for OM. EDX London underpins our shared vision of further expanding a network of markets on a common technology platform, providing key synergies to customers as well as exchange partners."
EDX London will pay OM a consideration of £24 million for the transfer of the equity derivatives business of OM London Exchange. London Stock Exchange will hold a 76 per cent controlling stake in the new company with OM holding a 24 per cent strategic interest, underlining its commitment to the success of the business. The earnings effect following the creation of EDX London is expected to be broadly earnings neutral, in operating terms, for both parties.
Subject to approval as a Recognised Investment Exchange by the Financial Services Authority, EDX London intends to begin trading in the second quarter of 2003.
