Equities trading focus : Exchange innovation : Aquis

AQUIS FORGES AHEAD.

Alasdair HaynesBrexit notwithstanding, the exchange is planning for the future. By Lynn Strongin Dodds

Geo-political tensions have hung over stock exchanges and Aquis Exchange is no exception. However, the increasing move to passive investing combined with ongoing cost pressures and the growing importance of technology has seen this disruptive exchange steadily make its mark on the pan-European cash equities landscape.

The latest set of results has seen the exchange grow its market share from 1.9% to nearly 4% over the past 12 months. It also reported a rise in the number of its trading members from 24 to 27 and an increase in the average value of monthly subscriptions. Combined, these trends helped grow revenues to £4m, double the previous level and 19% ahead of analysts’ expectations.

As expected, Aquis’s annual losses widened to £3.4m from £3m on the back of £1m of exceptional costs associated with its initial public offering as well as investments in personnel and technology. This pushed expenses up to £7.1m from £5.3m. The uncertainty surrounding Brexit has also been a factor across the financial services sector and this is likely to continue to impact activity into 2019.

However, Aquis as with so many organisations is not waiting for the UK government to make a decision. It applied for, and recently received approval to launch a new MTF in Paris to be dubbed Aquis Exchange Europe. The move was first mooted last autumn when Aquis Exchange CEO, Alasdair Haynes said the two French regulatory authorities were aligned with the exchange operator’s philosophy of competing on a level playing field, having maximum transparency and achieving best execution.

Head of sales and business development, Graham Dick, has relocated to the French capital as the CEO. There are 12 pilot stocks available for trading to prove the exchange is ready for Brexit and any migration from London.

“We are delighted to have secured an avis favorable from the ACPR (Autorité de Contrôle Prudentiel et de Résolution) and Autorité des Marchés Financiers (AMF) well ahead of Brexit and feel confident that with two MTFs – one in the UK and one within the EU27 – we are now very well positioned to offer our members an uninterrupted service, whichever form Brexit takes,” commented Alasdair Haynes.

He added, “We also believe we are well placed to benefit from additional regulation, given our robust and agile business model, our lean cost structure and our technology leadership. The Board is confident there remains enormous potential for our exchange model to disrupt further incumbent trading models and win more market share across Europe.”

Aquis opened its doors in 2013 and shook up the world of stock trading with its unique subscription-based model. Dubbed the Spotify of the exchange world, traders on Aquis pay a rate according to the level of activity, making it an attractive alternative to banks and fund managers who trade shares across Europe, rivalling Cboe, Turquoise and many national exchanges. It contrasts with the traditional payment structures which typically charge users a percentage of the value of each stock trade.

Overall, the last 12 months have been a busy time. The most momentous was the listing on the Alternative Investment Market in June 2018 which raised £32m and received the backing of heavyweight shareholders including the trading firm XTX Markets, the investment manager Rathbones, and the asset managers Schroders and Invesco.

Aquis has also been active on the technology front. Its Aquis Technologies division develops and provides trading and surveillance technology as well as consultancy and guidance on best practice to a broad range of financial service firms. The objective is to work in partnership to help market participants navigate the regulatory maze as well as find the most optimal ways to position and sharpen their business edge

The most recent example is supplying AkinovA (an electronic marketplace for the transfer and trading of (re)insurance risks) with an institutional grade, high speed, high capacity matching engine and a surveillance solution, including first line surveillance, as well as market operations and reporting. Across financial services, the importance of compliance and surveillance systems continues to increase due to the Market Abuse Regulation (MAR) and MiFID II. These require that trading firms across the spectrum must implement systems to monitor and analyse their order flow and transactions to enable detection of actual and attempted market abuse and to fulfil best execution criteria.

Looking ahead, the UK and Europe seem to be holding their collective breadth waiting for British politicians to come to some or any kind of agreement regarding Brexit. Against any backdrop of uncertainty, companies have to be nimble and be armed with the latest technological tools to adapt and leverage changing conditions. Aquis has proved over the past six years that it is more than able to meet the challenges ahead. 

©Best Execution 2019

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