Banks choose Linklaters for LSE alternative

Linklaters has beaten Clifford Chance to instructions from a consortium of investment banks that are attempting to launch a rival trading platform to the London Stock Exchange (LSE).

Linklaters’ financial markets partner Peter Bevan is leading the team representing the banks. It is understood that a multidisciplinary team from Clifford Chance also pitched for instruction six months ago but lost out to Linklaters.

Last week, the consortium, including longstanding Linklaters’ client Goldman Sachs, announced its intention to snub the LSE and its high trading fees by setting up a new system of electronic trading of shares across Europe.

The banks will form a new company with independent management, they said, which would operate independently of national exchanges.

Initially, the platform will trade in Europe’s biggest stocks, including components of the FTSE 350, but the plan is to roll out derivatives and other instruments.

The other banks involved are Citigroup, Credit Suisse, Deutsche Bank, Merrill Lynch, Morgan Stanley and UBS. In aggregate, the seven banks account for over 50 per cent of all European equities trading.

The banks’ announcement of their plan on 14 November caused the LSE’s shares to drop 74p to 1230p and left the bourse vulnerable for Nasdaq to make its attack on November 20 at 1243p a share, the minimum it could offer under City takeover rules.

New European legislation on financial instruments, known as MiFID, which comes into force in November 2007, has opened the way for the banks’ plan. MiFID will regulate trading platforms but will make it easier for them to compete against traditional bourses.

The banks’ spokesperson said in a statement: “We are responding to the MiFID legislation by creating an integrated pan-European trading platform where equities can be traded more cost effectively, obtaining significant liquidity with greater efficiency for each and every participant in the equity markets.”