Chi-X
Encyclopedia
Chi-X Europe is a London
-based, order-driven pan-European equity exchange, or Multilateral Trading Facility
(MTF). It is an alternative exchange and trades equities that are listed on primary exchanges such as the London Stock Exchange
, Frankfurt Stock Exchange
, Euronext
and OMX
. Chi-X's aim is to be a low-cost trading facility, undercutting other exchanges for price and speed.
Chi-X Europe indicates that it offers trades on more than "1,200 of the most liquid stocks across 23 indices in 15 European markets." They provide both a visible order book and a non-displayed order book, which the company refers to as Chi-Delta .
The name Chi-X is derived from the Greek letter Chi
, written Χ, symbolising the crossing of the two sides of a trade.
, which is itself a subsidiary of Nomura Holdings
, Chi-X Europe is today owned by a consortium of major global financial institutions including BNP Paribas
, Citadel
, Citigroup
, Credit Suisse
, Fortis
, GETCO Europe Ltd
, Goldman Sachs
, Instinet Holdings, Merrill Lynch
, Morgan Stanley
, Optiver, Société Générale
and UBS. Chi-X Europe became the first multilateral trading facility that launched in anticipation of the European Union
's November 2007 Markets in Financial Instruments Directive (MiFID), which paved the way for the introduction of alternative trading venues in Europe.
In February 2009, founding Chief Executive Officer Peter Randall quit Ch-X Europe unexpectedly and was replaced by Alasdair Haynes in December 2009. Randall reportedly left for "personal reasons". Citadel LLC named Randall as chief executive of Equiduct Systems on 18 December 2009. Equiduct is an MTF, similar to Chi-X.
Also in February 2009, The Wall Street Journal
reported that "Chi-X performed 9.1% of trades in the 10 largest European markets, including 15% of trades in FTSE 100
stocks" and also that "In London, Europe's main equity center, Chi-X Europe is now trading nearly 15% of U.K. equities, a performance that has contributed to the London Stock Exchange's market share falling below 75% for the first time."
In analysing market conditions for MTFs in February 2009, The Wall Street Journal said: "MTFs are facing an uncertain future... trading activity slowed drastically in November [2008], as hedge funds and investment banks, which had exploited the technological advantages of MTFs for their complex trades, withdrew from the market... Traditional exchanges typically have a spread of interests... they generally have derivatives and bond trading, post-trading services and data and technology units to keep them buoyant when trading slows... The MTFs, by contrast, rely exclusively on equity trading for revenue, a problem compounded by their determination to offer lower fees than the exchanges, which means they also are operating on thin margins... The consensus among their customers is that not all the MTFs will survive the next six months."
In December 2009, Chi-X Europe had secured £12 million (US$17 million) in new funding from its existing shareholders. The arrangement reduced the stake of its majority owner, Instinet Europe, part of Instinet International.
In February 2010, Chi-X Europe's chief operating officer
Hirander Misra quit suddenly the firm to "pursue other interests". Misra had helped guide the company along with Randall, from its start until it became the second-largest market by share.
On Wednesday, 22 April 2009, Chi-X announced opening a dark pool of liquidity, designated Chi-Delta. The company reached profitability in 2010. On 23 August 2010 the company announced that an unnamed third part had expressed interested in buying the organisation.
By September 2010, over 25% of all trading in FTSE 100 stocks was taking place on Chi-X Europe along with over 20% in trading of AEX index
, DAX
and BEL20
stocks.
In February 2011, BATS Global Markets agreed to buy Chi-X Europe for $300 million . BATS announced in April 2011 that CEO Mark Hemsley will replace Alasdair Haynes at the combined company.
In June 2011, The Office of Fair Trading
referred the anticipated acquisition by BATS Trading Limited of Chi-X Europe Limited to the Competition Commission for further investigation to determine whether a substantial lessening of competition is probable as a result of the anticipated merger. The Competition Commission is expected to report by 2 December 2011.
(FSA) to operate a multilateral trading facility (MTF), as defined under MiFID
, for the trading of pan-European securities. Chi-X Europe meets the same level of regulatory standards as traditional exchanges and receives the same level of supervision as explained by the FSA: "we aim to ensure that Multilateral Trading Facilities (MTFs) with a similar market impact or market share as Regulated Markets (i.e. exchanges) receive the same level of supervision as those markets, even though MTFs sit under a slightly different legal regulatory regime."
London
London is the capital city of :England and the :United Kingdom, the largest metropolitan area in the United Kingdom, and the largest urban zone in the European Union by most measures. Located on the River Thames, London has been a major settlement for two millennia, its history going back to its...
-based, order-driven pan-European equity exchange, or Multilateral Trading Facility
Multilateral Trading Facility
A Multilateral Trading Facility is a specific type of European financial trading system. The concept was introduced within the Markets in Financial Instruments Directive , a European financial law, and describes a trading venue that brings together buyers and sellers in a non-discretionary way...
(MTF). It is an alternative exchange and trades equities that are listed on primary exchanges such as the London Stock Exchange
London Stock Exchange
The London Stock Exchange is a stock exchange located in the City of London within the United Kingdom. , the Exchange had a market capitalisation of US$3.7495 trillion, making it the fourth-largest stock exchange in the world by this measurement...
, Frankfurt Stock Exchange
Frankfurt Stock Exchange
The Frankfurt Stock Exchange is the world's 12th largest stock exchange by market capitalization. Located in Frankfurt am Main, Germany, the Frankfurt Stock Exchange is owned and operated by Deutsche Börse, which also owns the European futures exchange Eurex and the clearing company...
, Euronext
Euronext
Euronext N.V. is a pan-European stock exchange based in Amsterdam and with subsidiaries in Belgium, France, Netherlands, Portugal and the United Kingdom. In addition to equities and derivatives markets, the Euronext group provides clearing and information services...
and OMX
OMX
OMX AB is a Swedish-Finnish financial services company, formed in 2003 through a merger between OM AB and HEX plc and is now a part of the NASDAQ OMX Group since February 2008.It has two divisions, OMX Exchanges, which operates eight stock exchanges mainly in the Nordic and Baltic...
. Chi-X's aim is to be a low-cost trading facility, undercutting other exchanges for price and speed.
Chi-X Europe indicates that it offers trades on more than "1,200 of the most liquid stocks across 23 indices in 15 European markets." They provide both a visible order book and a non-displayed order book, which the company refers to as Chi-Delta .
The name Chi-X is derived from the Greek letter Chi
Chi (letter)
Chi is the 22nd letter of the Greek alphabet, pronounced as in English.-Greek:-Ancient Greek:Its value in Ancient Greek was an aspirated velar stop .-Koine Greek:...
, written Χ, symbolising the crossing of the two sides of a trade.
History
Established in 2007 by InstinetInstinet
Instinet is an institutional, agency-only broker. As such, it executes trades for roughly 1,500 “buyside” clients such as asset management firms, hedge funds, insurance companies, mutual funds and pension funds...
, which is itself a subsidiary of Nomura Holdings
Nomura Holdings
Nomura Holdings, Inc. is a Japanese financial holding company, and a principal member of the Nomura Group.In October 2008 the company acquired Lehman Brothers Holdings's investment banking and equities unit in Asia and Europe and kept on most of its employees. Nomura paid $225 million for the...
, Chi-X Europe is today owned by a consortium of major global financial institutions including BNP Paribas
BNP Paribas
BNP Paribas S.A. is a global banking group, headquartered in Paris, with its second global headquarters in London. In October 2010 BNP Paribas was ranked by Bloomberg and Forbes as the largest bank and largest company in the world by assets with over $3.1 trillion. It was formed through the merger...
, Citadel
Citadel Investment Group
Citadel LLC is a global financial institution based in Chicago, Illinois. Founded in 1990 by Kenneth C. Griffin, the firm today deploys capital across multiple asset classes and strategies...
, Citigroup
Citigroup
Citigroup Inc. or Citi is an American multinational financial services corporation headquartered in Manhattan, New York City, New York, United States. Citigroup was formed from one of the world's largest mergers in history by combining the banking giant Citicorp and financial conglomerate...
, Credit Suisse
Credit Suisse
The Credit Suisse Group AG is a Swiss multinational financial services company headquartered in Zurich, with more than 250 branches in Switzerland and operations in more than 50 countries.-History:...
, Fortis
Fortis (finance)
Fortis N.V./S.A. was a company active in insurance, banking and investment management. In 2007 it was the 20th largest business in the world by revenue but after encountering severe problems in the financial crisis of 2008, most of the company was sold in parts, with only insurance activities...
, GETCO Europe Ltd
Global Electronic Trading Company
The Global Electronic Trading Company , or Getco LLC, is a proprietary algorithmic trading and electronic market making firm based in Chicago, Illinois.-Description:...
, Goldman Sachs
Goldman Sachs
The Goldman Sachs Group, Inc. is an American multinational bulge bracket investment banking and securities firm that engages in global investment banking, securities, investment management, and other financial services primarily with institutional clients...
, Instinet Holdings, Merrill Lynch
Merrill Lynch
Merrill Lynch is the wealth management division of Bank of America. With over 15,000 financial advisors and $2.2 trillion in client assets it is the world's largest brokerage. Formerly known as Merrill Lynch & Co., Inc., prior to 2009 the firm was publicly owned and traded on the New York...
, Morgan Stanley
Morgan Stanley
Morgan Stanley is a global financial services firm headquartered in New York City serving a diversified group of corporations, governments, financial institutions, and individuals. Morgan Stanley also operates in 36 countries around the world, with over 600 offices and a workforce of over 60,000....
, Optiver, Société Générale
Société Générale
Société Générale S.A. is a large European Bank and a major Financial Services company that has a substantial global presence. Its registered office is on Boulevard Haussmann in the 9th arrondissement of Paris, while its head office is in the Tours Société Générale in the business district of La...
and UBS. Chi-X Europe became the first multilateral trading facility that launched in anticipation of the European Union
European Union
The European Union is an economic and political union of 27 independent member states which are located primarily in Europe. The EU traces its origins from the European Coal and Steel Community and the European Economic Community , formed by six countries in 1958...
's November 2007 Markets in Financial Instruments Directive (MiFID), which paved the way for the introduction of alternative trading venues in Europe.
In February 2009, founding Chief Executive Officer Peter Randall quit Ch-X Europe unexpectedly and was replaced by Alasdair Haynes in December 2009. Randall reportedly left for "personal reasons". Citadel LLC named Randall as chief executive of Equiduct Systems on 18 December 2009. Equiduct is an MTF, similar to Chi-X.
Also in February 2009, The Wall Street Journal
The Wall Street Journal
The Wall Street Journal is an American English-language international daily newspaper. It is published in New York City by Dow Jones & Company, a division of News Corporation, along with the Asian and European editions of the Journal....
reported that "Chi-X performed 9.1% of trades in the 10 largest European markets, including 15% of trades in FTSE 100
FTSE 100 Index
The FTSE 100 Index, also called FTSE 100, FTSE, or, informally, the footsie , is a share index of the 100 most highly capitalised UK companies listed on the London Stock Exchange....
stocks" and also that "In London, Europe's main equity center, Chi-X Europe is now trading nearly 15% of U.K. equities, a performance that has contributed to the London Stock Exchange's market share falling below 75% for the first time."
In analysing market conditions for MTFs in February 2009, The Wall Street Journal said: "MTFs are facing an uncertain future... trading activity slowed drastically in November [2008], as hedge funds and investment banks, which had exploited the technological advantages of MTFs for their complex trades, withdrew from the market... Traditional exchanges typically have a spread of interests... they generally have derivatives and bond trading, post-trading services and data and technology units to keep them buoyant when trading slows... The MTFs, by contrast, rely exclusively on equity trading for revenue, a problem compounded by their determination to offer lower fees than the exchanges, which means they also are operating on thin margins... The consensus among their customers is that not all the MTFs will survive the next six months."
In December 2009, Chi-X Europe had secured £12 million (US$17 million) in new funding from its existing shareholders. The arrangement reduced the stake of its majority owner, Instinet Europe, part of Instinet International.
In February 2010, Chi-X Europe's chief operating officer
Chief operating officer
A Chief Operating Officer or Director of Operations can be one of the highest-ranking executives in an organization and comprises part of the "C-Suite"...
Hirander Misra quit suddenly the firm to "pursue other interests". Misra had helped guide the company along with Randall, from its start until it became the second-largest market by share.
On Wednesday, 22 April 2009, Chi-X announced opening a dark pool of liquidity, designated Chi-Delta. The company reached profitability in 2010. On 23 August 2010 the company announced that an unnamed third part had expressed interested in buying the organisation.
By September 2010, over 25% of all trading in FTSE 100 stocks was taking place on Chi-X Europe along with over 20% in trading of AEX index
AEX index
The AEX index, derived from Amsterdam Exchange index, is a stock market index composed of Dutch companies that trade on Euronext Amsterdam, formerly known as the Amsterdam Stock Exchange. Started in 1983, the index is composed of a maximum of 25 of the most actively traded securities on the exchange...
, DAX
DAX
The DAX is a blue chip stock market index consisting of the 30 major German companies trading on the Frankfurt Stock Exchange. Prices are taken from the electronic Xetra trading system...
and BEL20
BEL20
The BEL20 is the benchmark stock market index of Euronext Brussels. In general, the index consists of a minimum of 10 and a maximum of 20 companies traded at the Brussels Stock Exchange. Since 20 June 2011, the BEL20 has contained 20 listings.-Rules:...
stocks.
In February 2011, BATS Global Markets agreed to buy Chi-X Europe for $300 million . BATS announced in April 2011 that CEO Mark Hemsley will replace Alasdair Haynes at the combined company.
In June 2011, The Office of Fair Trading
Office of Fair Trading
The Office of Fair Trading is a not-for-profit and non-ministerial government department of the United Kingdom, established by the Fair Trading Act 1973, which enforces both consumer protection and competition law, acting as the UK's economic regulator...
referred the anticipated acquisition by BATS Trading Limited of Chi-X Europe Limited to the Competition Commission for further investigation to determine whether a substantial lessening of competition is probable as a result of the anticipated merger. The Competition Commission is expected to report by 2 December 2011.
Regulatory environment
Chi-X Europe is authorised by the Financial Services AuthorityFinancial Services Authority
The Financial Services Authority is a quasi-judicial body responsible for the regulation of the financial services industry in the United Kingdom. Its board is appointed by the Treasury and the organisation is structured as a company limited by guarantee and owned by the UK government. Its main...
(FSA) to operate a multilateral trading facility (MTF), as defined under MiFID
MiFID
The Markets in Financial Instruments Directive as subsequently amended is a European Union law that provides harmonised regulation for investment services across the 30 member states of the European Economic Area...
, for the trading of pan-European securities. Chi-X Europe meets the same level of regulatory standards as traditional exchanges and receives the same level of supervision as explained by the FSA: "we aim to ensure that Multilateral Trading Facilities (MTFs) with a similar market impact or market share as Regulated Markets (i.e. exchanges) receive the same level of supervision as those markets, even though MTFs sit under a slightly different legal regulatory regime."
See also
- Turquoise (trading platform)
- Chi-X GlobalChi-X GlobalChi-X Global is a global, consortium-backed operator of alternative equity trading venues that compete with primary exchanges. Chi-X Global operates Chi-X Australia, Chi-X Canada, Chi-X Japan, Chi-East and the Chi-Tech technology unit.Originally launched by Nomura Holdings subsidiary Instinet,...
- a separately operated and owned provider of alternative trading venues also founded by InstinetInstinetInstinet is an institutional, agency-only broker. As such, it executes trades for roughly 1,500 “buyside” clients such as asset management firms, hedge funds, insurance companies, mutual funds and pension funds...
.