D.Boerse cuts computer trading fees, share slides

(Adds spokesman quote, analyst view, updates share price)

By Peter Starck

FRANKFURT, Aug 26 (Reuters) - German stock exchange operator Deutsche Boerse AG (DB1Gn.DE: Quote, Profile, Research, Stock Buzz), whose cash equities business Xetra is facing increased competition, said on Tuesday it would cut fees for algorithmic, or computer-driven, transactions.

The Boerse, which earns more from its derivatives trading platform Eurex and custody and settlement house Clearstream than from Xetra, said higher trading volumes were likely to offset some of the revenue lost from the trading and clearing fee cuts.

DZ Bank analyst Matthias Duerr said he expected a negative effect of at most 1 percent on Boerse's earnings per share.

Boerse's own stock, part of the EuroSTOXX50 index of top European shares, fell 1.9 percent to 59.48 euros by 1050 GMT, underperforming an index of the world's leading exchanges , which was down 1.1 percent.

"As of September 2008, a new pricing and discount model will apply for algorithmic trading," the Boerse said in a statement. The maximum discount rate would rise to 60 percent from 49 percent.

"Some ATP (automated trading programme) customers have said they would increase their Xetra order-flow if fees were lower. That's why we have taken this step," a Boerse spokesman told Reuters.

Long established exchanges such as the Boerse, NYSE Euronext (NYX.N: Quote, Profile, Research, Stock Buzz) and the London Stock Exchange (LSE) (LSE.L: Quote, Profile, Research, Stock Buzz) are competing for cash equities trading market share with start-ups such as Japanese Nomura's (8604.T: Quote, Profile, Research, Stock Buzz) Chi-X and Turquoise, the latter a rival platform sponsored by a group of leading global investment banks.

On Aug. 21, SWX Europe, the London-based securities exchange owned by SWX Swiss Exchange, announced a 30 percent cut in trading fees, effective October, following a 15 percent fee cut in April.

The LSE has also unveiled a new tariff model which reduces trading fees by about 10 percent.

In the second quarter of 2008, Deutsche Boerse's Xetra platform accounted for less than a fifth of group revenue and operating profit, while Eurex and Clearstream each delivered around 40 percent of revenue and more than a third of operating profit.

Algorithmic trading accounts for more than 40 percent of Xetra volumes, which the Boerse has said it expects will grow significantly. On Nomura's Chi-X, by comparison, such trading accounts for an estimated 90 percent of the action.

The Boerse said the discounts taking effect next month would reduce annual fee revenue by an estimated 35 million euros ($51.5 million), assuming unchanged volumes compared with the first half of this year.

"Due to the price sensitivity of trading and clearing participants, positive impacts on transaction volumes and correspondingly a large compensation of the price effects on sales revenues are expected," the Boerse said.

DZ Bank's Duerr saw the fee and clearing price adjustments as a move by Boerse to defend its position against alternative trading platforms.

The potential to increase liquidity was positive, he said, reiterating his "buy" recommendation and fair value of 104 euros for the Boerse share. (Additional reporting by Anika Lehmann; editing by David Holmes and Sophie Walker)