London Stock Exchange looking to upgrade trading platform

The LSE is looking to offer faster trading

The London Stock Exchange (LSE) is nearing a decision to pick a new and faster trading software platform, according to its chief executive.

The current £40m TradElect trading engine was installed by Accenture in 2007. But in an interview with Dow Jones Newswires, Xavier Rolet said the company has been looking at a number of new technologies around the world.

"We want to go a lot faster," he said. "We have 2.7 milliseconds [transaction time] at the moment. The goal is to increase speed to sub-millisecond for sure, and have the ability to go even below that afterwards."

The LSE is facing competition from smaller trading platforms such as Chi-X Europe, Turquoise, BATS Trading and Nasdaq OMX Europe, and trading speed is becoming an important market differentiator.

Chi-X, the most successful among the multi-lateral trading facilities in gaining market share in Europe, has an average trading speed of 0.4 milliseconds.

Rolet said the LSE will also be looking to reduce technology costs.

"If we can substantially reduce our costs, like technological costs, and scale the capabilities in the throughput of our processing engine, we can lower fees while maintaining margin and boost volume growth," he said.

Later this year the LSE is also looking to launch Baikal, its “dark-pool” facility.

Dark pools are electronic trading platforms that match buyers and sellers anonymously, allowing traders to move usually large amounts of stock without their activities being seen in the open market, lessening any impact on share price.

LSE decided to end an IT operations outsourcing contract with Accenture in 2007, but signed an extension related to software development work and support until March 2010.