London Bourse Delays Baikal Launch on Turquoise Talks, WSJ Says

By Patrick Rial and Jackie Cohen

Nov. 9 (Bloomberg) -- London Stock Exchange Group Plc has postponed the launch of its dark-pool trading system Baikal as it negotiates a possible purchase of rival Turquoise, the Wall Street Journal reported.

Jane Zhu, Hong Kong-based head of Asia Pacific for the LSE, wasn’t immediately available to comment. The LSE, Europe’s largest bourse by value of listed companies, had planned to start matching orders through Baikal this year.

Stock exchanges have been losing market share to so-called multilateral trading facilities including Turquoise that offer lower fees, faster trades and anonymity. The LSE said on Oct. 1 it’s in exclusive talks with Turquoise, a trading system founded by banks including Morgan Stanley and Goldman Sachs Group Inc., that “may lead to a transaction.”

“You’re going to see a general move of more and more exchanges looking to set up something first of all from a profitability perspective, but also from a competitive perspective you have to be involved,” said Christian Kielland, head of trading at BTIG Hong Kong Ltd.

Trading on dark pools, off-exchange platforms that don’t display public quotes, will likely rise to 7 percent of the total in “major” European markets next year from the current level of 4.1 percent, Tabb Group LLC said on Nov. 2. Average daily trading on the LSE fell 43 percent in the five months ended Aug. 31, the exchange said in September.

The LSE will likely merge Turquoise with Baikal in a non- cash transaction that will give the LSE a 51 percent share of the joint venture, the Financial Times reported on Oct. 31.

The “need to effect large crosses of risk not just for equities, but for fixed income, foreign exchange, for many asset classes, matches the needs of corporates, investors and intermediaries,” Xavier Rolet, chief executive of the bourse, said in an Oct. 28 interview with Bloomberg. “That need has existed for decades and will continue to exist.”

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Jackie Cohen in San Francisco at jcohen72@bloomberg.net.