London Stock Exchange takes 60 percent stake in Turquoise, merges dark liquidity pool

LSE takes 60 percent stake in Turquoise

LONDON — The London Stock Exchange PLC said Monday it has agreed to take a 60 percent stake in rival loss-making trading platform Turquoise and plans to create a new pan-European trading venture by merging it with its own “dark pool” platform.

The LSE said it had agreed to fund the new venture for the first two years following completion of the deal, and expects to incur exceptional costs of up to 20 million pounds ($32.3 million) in the current year, reflecting the cost of restructuring and integration.

The new venture, merging the LSE’s Baikal trading platform, will retain the Turquoise name.

Existing shareholders in Turquoise will own 40 percent of the new company.

The LSE added that it intended to broaden equity participation in the new venture by selling up to a further 9 percent of the issued share capital to other interested parties.

“The European marketplace for trading securities has scope to become more efficient and to grow significantly in the coming years,” said LSE Chief Executive Xavier Rolet. “Turquoise’s existing pan-European footprint is a strong proposition and together with the introduction of new trading technology and a neutral structure, we believe it is now well positioned to be an agent of change and to capture a healthy slice of the market’s growth potential.”

Turquoise CEO Eli Lederman said that the LSE’s support would enable the struggling platform to “simplify our operational structure, attract a wider network and expand the platform’s product base.”

Turquoise made a pretax loss of 15.7 million pounds ($25.4 million.)

“Dark pools” are trading platforms where banks, hedge funds and institutional investors can trade large blocks of shares in secret.

The secretive nature of the platform is attractive to banks and other investors because it avoids alerting competitors to their trading strategy and minimizes the impact of shifting stock prices on the market.

They have been gaining in popularity in recent years, raising some concerns from market regulators about poor transparency.