Aquis Exchange Plans Ramp-Up
The new Aquis Exchange could have 33 clients by the first quarter of next year according to Alasdair Haynes, chief executive officer.
Aquis Exchange is due to launch next month, subject to regulatory approval. The firm held its first dress rehearsal on October 19 to test the platform with market participants and another will take place on November 9.
“It takes time for firms to get connected to a new venue and start trading, but we could have 14-15 companies trading by the end of the year and another 18 in the first quarter of next year,” Haynes told Markets Media.
Haynes, the former chief executive of Chi-X Europe, founded Aquis Exchange to provide more competition in Europe where more than 90% of equity trading in each country takes place in two venues – BATS Chi-X or the relevant national exchange.
“At the beginning, it will be more interesting to see who is connecting than the volumes of trading. It will take between 12 and 18 months to see if the subscription model works and gain a reasonable market share,” said Haynes.
He was inspired to introduce subscriptions when his teenage son bought a new mobile phone and could choose different packages based on how much data he uses. At Aquis customers pay in advance for message traffic, rather than a percentage of the total value of each trade, as on rival exchanges.
“I don’t understand the logic of exchanges charging for trading on a variable basis. At Aquis, by charging for messaging traffic we have certainty over our revenues, as long as we keep our customers satisfied. This way, we can manage our costs and be competitive,” said Haynes.
Designated market makers are not charged for messages related to posted liquidity. Other Aquis customers can pay £2,500 per month for up to 25,000 messages a day or £10,000 a month for more than 25,000 messages a day with no upper limit. Some high-frequency trading strategies have met criticism for cancelling, rathe than executing, a high proportion of their trade indications. “Unlimited message traffic does not mean uncontrolled traffic, we will monitor traffic for abusive behaviour,” Haynes argued.
Subscriptions do not have to be taken out for a specified period. “Subscriptions are not tied to a length of time, such as two years, as that is like having a liquidity agreement which does not work. We are confident that we can deliver to our customers and it is an easier sell to say that if they don’t like our service, they don’t have to pay,” Haynes added.
Rival exchanges can also make more money from providing market data than from trading revenues. “We will add some very modest market data fees to the subscription in a couple of years. It is nuts how market data has become a money-spinner for exchanges and that needs to be overhauled,” Haynes said.
If the Aquis model is successful Haynes believes it can be exported to other geographies and asset classes.