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The London Stock Exchange (“the Exchange”) has today, in line with normal practice, written to customers to advise them of its new trading tariffs for the financial year beginning 1 April 2007.
In formulating these changes the Exchange has taken account of its overarching principles of encouraging and rewarding liquidity provision, facilitating new customer trading strategies and enhancing market efficiency. Lower fees stimulate volume growth and increase liquidity, which, in turn, reduce overall transaction costs.
Details of the tariff changes can be found on the Exchange’s website*. The changes will be phased in between April and November, and show:
- A decrease in the SETS Exchange charge for aggressive trades.
- The equivalent passive tariff remains free.
- A deeper volume discount scheme, which will enable firms to benefit sooner from lower charges.
- The introduction of ‘SETS Internaliser’, a lower tariff for self executions, which will incentivise firms to move internalised trades onto the order book.
- A new discounted trade reporting tariff to support the introduction of our MiFID European Trade Reporting service.
2007 will be an important year for the Exchange with the launch of TradElect, its new trading platform, in the second quarter. A review of trading tariffs in December 2007 will take into account, amongst other factors, the volume growth resulting from this particular development.
In terms of quantifying these fee reductions, if the new tariffs had been applied from the beginning of the current financial year, SETS order book yield for the period 1 April to 31 December 2006 would have moved from £1.36 to £1.23 per trade, (based on an average 324,000 daily SETS trades for the nine months); UK off-book yield would have reduced from £0.89 to c£0.20 per trade (based on 41,000 average daily trades for the nine months). IEM revenue totalling £3m for the nine months year to date will fall away, to be replaced by the new European Trade Reporting service.
The Board believes that the above tariff reductions, together with the introduction of TradElect will stimulate new and additional trading activity and is confident that Broker Services will continue to deliver strong revenue growth.
The Exchange will provide its expectation of volume growth for the next financial year in our next shareholder circular to be released by 20 January 2007.
