Speaking at a conference in London Eli Lederman, CEO of Trade Turquoise, said he is seeking a year’s worth of operating capital. “We're raising money which will see us through the next 12 months by which time we will have turned the corner and become profitable,” he told reporters.
It has been a febrile period for liquidity venues, and this latest round of fund-raising marks the third occasion in less than a year that the troubled start-up trading platform has been forced to tap its bank owners for additional capital.
Not only has the pan-European trading landscape been assaulted by a vast host of new trading venues, but the collapse of Lehman Brothers in September 2008 obliterated trading volumes, further inflaming competition for liquidity. In what was a moment of exceptionally unfortunate timing, Trade Turquoise saw its liquidity provision agreements, under which its investors contracted to make markets on its platform, expire in early March, causing volumes on the platform to fall by about 50%.
Trade Turquoise was among the first venues to be unveiled amid the preparations for MiFID, but a prolonged technology procurement process put the platform behind in the race to go live and attract volumes.
As the battle for liquidity heats up, several new trading platforms, officially known under MiFID as multi-lateral trading facilities (MTF), have been forced to slash their fees, in what many analysts and market-watchers regard as an increasingly unsustainable competitive strategy.
Steve Grob, director of strategy at technology provider Fidessa and pioneer of the company’s so-called fragmentation index, which tracks the distribution of liquidity across Europe, says the MTF model is in doubt.
“I’d ask some pretty fundamental questions of the MTF model: the ones that will succeed we have to be able to differentiate on their model not on price. If everyone competes on price then it’s a race to zero. The risk of trying to do it too cheaply is that nothing can thrive,” he says.
