A group of nine of the world's biggest investment banks said on Tuesday they planned to set up a new system for reporting share trades, bypassing the major European stock exchanges and ahead of new European securities regulations due to come into force later this year.
The group, which includes Citigroup, Goldman Sachs, HSBC, Merrill Lynch and Morgan Stanley, among others, said the platform would create significant cost savings for its participants, although they declined to provide specific details.
The move is in response to the European Union's Markets in Financial Instruments Directive (MiFID), expected to come into force on November 1, 2007, the banks said.
In some markets in Europe, including Britain, participants are currently required to report trades conducted over-the-counter (OTC) to exchanges, who charge a fee and then generate market data revenues from collating and selling this information, they added.
In other markets, such as Germany, there is no requirement to report OTC trades and knowledge of these trades is not made available to the market.
As a response, the consortium said it has taken the initiative to create a single pre-trade and post-trade reporting and market data platform on a pan-European basis.
Sources close to the matter told Reuters in August that the group of banks, which also includes ABN AMRO, Deutsche Bank, UBS and Credit Suisse, was planning a rival system in part because the current charges, particularly in London, are too high.
As well as the London Stock Exchange, which currently has the monopoly on collecting sales and trading data in London, other services, such as Virt-X and Plus Markets Group, also offer trade reporting services.
Speaking on a conference call on Tuesday, a spokesman for the banks said they had not approached any of the incumbent service providers because they did not want any of them to be unfairly advantaged.
The reason to go public with the announcement today is so we can start negotiating with other participants ... we have not had any conversations yet, a representative from one of the banks said, adding that the new system would be extremely price competitive.
Notably, JP Morgan and Lehman Brothers are not involved in the project, since they act as brokers to the London Stock Exchange.
The LSE did not immediately return calls seeking comment but last month, when asked about the rival plan, a spokesman said the LSE ...already has an efficient central infrastructure in place for reporting trades.
MiFID, due to take effect in November 2007, aims to create a pan-EU market for financial products such as stocks and bonds and will affect all firms buying and selling securities in the bloc, including transaction reporting.