Oslo Børs has agreed a letter of intent with London Stock Exchange Group (LSEG) to form a strategic partnership, a key component of which includes the provision of trading systems to Oslo Børs. Subject to the successful completion of terms, Oslo Børs and LSEG will also cooperate on market and product development, and a deepening of ties between the two markets.
London Stock Exchange Group (LSEG) is Europe's leading exchange business. As well as being the operator of the London Stock Exchange, the Group also encompasses the Italian exchange, Borsa Italiana and is active in the provision of derivatives, fixed income and post trade services.
LSEG’s trading system, TradElect, was developed in-house, and is used by the Johannesburg Securities Exchange as well as by London Stock Exchange and Borsa Italiana.
“London Stock Exchange Group is excited about the prospects for partnering with Oslo Børs on market, business and technology developments. Oslo Børs has an impressive track record. In particular, it has built up a very strong energy sector in both cash and derivatives, and has attracted a broad range of international investors and exchange members. Moreover, we share a vision for cooperation, embedded in the use of shared technology and delivered in the interests of the market as a whole”, says Clara Furse, Chief Executive of London Stock Exchange Group.
“London is the financial centre of Europe. We are therefore very pleased that we both see opportunities through a strategic partnership. We have reached excellent results through our collaboration with Nasdaq OMX. However, based on the new competitive situation in which we find ourselves, we see that a partnership with the London Stock Exchange will be more complementary for our strategy”, says Bente A. Landsnes, Chief Executive Officer of Oslo Børs.
TradElect is a new and state-of-the-art trading system, and has already proved to be a stable and efficient platform for equities trading. The system offers flexibility not only for future changes in requirements and additional functionality, but also for increases in capacity and enhancements to response times (latency). Oslo Børs intends to use LSEG as its partner for the systems it uses for equities, fixed income instruments and derivatives, as well as for distribution of market data.
Both Oslo Børs and the London Stock Exchange are among the exchanges that use the internationally recognized market surveillance system SMARTS to ensure the quality of their markets. An agreement between Oslo Børs and LSEG would also include enhanced collaboration on market surveillance through use of the same surveillance system.
Oslo Børs anticipates replacing its existing trading platforms in 2009/2010.
An important factor in the decision to enter into discussions with LSEG as a possible stock exchange partner and system supplier is the scope for business opportunities. In terms of the composition of listed companies, the London Stock Exchange (LSE) shows greater similarities to Oslo Børs than other suppliers that have been considered, and we believe that Oslo Børs and the LSE will complement each other in their future business development. Recent years have seen very strong growth in investor interest in Norwegian companies by the international markets, and in particular by the UK market. The LSE has a sizeable network of member firms in this market, made up of around 240 investment firms with a broad geographical spread, and we believe that this network will play a positive role in creating greater investor interest in Norwegian companies and the Norwegian market.
Migration to the TradElect trading system is likely to involve project costs for Oslo Børs of approx. NOK 60 million. Assuming the current levels of trading volume and trading revenue for Oslo Børs, the annual cost of using TradElect would be around the same level as the cost of using the current trading systems.
Background
Oslo Børs currently has agreements in place to use two different
trading systems (SAXESS and Click), both of which are supplied by Nasdaq OMX.
The agreement for SAXESS expires in 2010, and Oslo Børs has therefore been
involved for some considerable time in evaluating various possible business
partners and suppliers of a new trading platform.
The strategy of Oslo Børs and its fellow subsidiaries VPS and Oslo Clearing reflects an intention for the group to remain a strong and independent Norwegian supplier of infrastructure for securities services to Norwegian companies, financial institutions and investors. This strategy requires marketplaces offering the highest standards of quality and investor confidence, together with reliable and secure clearing and settlement and other securities services. An agreement for collaboration with the London Stock Exchange would represent sound support for this strategy.
