The London Stock Exchange today announced a deal to acquire its loss-making rival Turquoise.
The agreement, which will see the LSE take a 60% stake in the smaller trading platform, will give it a trading presence across Europe.
It should also help repair the exchange’s relationships with the major investment banks.
Turquoise was set up in 2006 by a consortium of nine investment banks, including Goldman Sachs and Morgan Stanley, in an attempt to force the LSE to lower its fees.
It was officially launched in August last year, but has yet to make a profit and reported losses of £15.7m (€17.7m) for last year after the financial crisis disrupted growth plans.
LSE will retain the Turquoise brand, but combine it with its ’dark pool’ Baikal business. Dark pools are sites on exchanges where large trades can be executed for clients anonymously so they do not disrupt the market.
David Lester, the LSE’s head of IT, is expected to head up the new venture, which will be run as an independent operation.
The investment banks that founded Turquoise will hold a 40% stake in the new business.
The LSE has come under pressure from smaller trading platforms such as Chi-X and BATS, and recently said average daily ’bargains’ or trades in London had fallen by 10% to 633 million in the five months to August 31.
However, as Turquoise has only around a 5% market share, the LSE’s acquisition of the group is likely to do little to alleviate this pressure.
LSE chief executive Xavier Rolet said: “Turquoise’s existing pan-European footprint is a strong proposition and together with the introduction of new trading technology and a neutral structure, we believe it is now well positioned to be an agent of change and to capture a healthy slice of the market’s growth potential.”
In September the LSE announced it was cutting 12% of its staff in a move that would save it £11m (€12.4m) a year.
Its pre-tax profits fell to £79.4m (€89.3m) during the six months to the end of September, down from £127m (€143m) during the same period of the previous year.