The end of SWX Europe

Many years ago, I was involved during the early stages of a fledgling Recognised Investment Exchange in the UK called Tradepoint. The model it operated was revolutionary and addressed many of the flaws in the LSE operated model of the day.

They introduced the notion of clearing and a central counterparty to the UK equity market, using LCH as the operator of the arrangements. This was quite radical, monetising for the first time the inherent counterparty and market risks that went with current trading and settlement practices. Pre and post trade anonymity were side-effects of this structure and its' operation was underpinned by a reliance on electronic trading. Unfortunately, things that are now taken for granted were shunned by a market participants of the day who were happier with the status quo, prefering to ignore the risks, as well as remain inefficient.

Tradepoint had been launched with the backing of several banks, but who significantly avoided having to commit flow/liquidity to the new Exchange. As a consequence, despite being cost efficient thanks to its' technology, trading volumes were pitifully low and so it struggled in financial and credibility terms. In 1999, the business was re-financed and re-launched by a new consortium including Instinet. However, in 2000, amidst a backdrop of European Exchanges mergers & acquisitions, the Swiss Exchange bought Tradepoint and subsequently renamed it Virt-X.

In 2003, the business was finally forced to re-focuss its' efforts on the Group's key offering around Swiss stocks. Sadly, the Swiss Group this week announced the closure of SWX Europe, as the business became known.

Interesting there are many parallels between Laker Airways and today's low-cost airlines, and the link between Tradepoint and today's Multilateral Trading Facilities ["MTF"] such as Chi-X, Turquoise and BATS. Both were ahead of their time and sadly neither benefited from the revolution they foresaw.

I shall fondly remember "Tradepoint" and the contribution it made.
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