CLIFFORD Chance is set to mount a legal challenge against the Stock Exchange on behalf of its client Tradepoint, the new City share dealing system, because of the exchange's apparent attempts to strangle its new rival at birth.
The stand-off between the exchange and Tradepoint, due to launch on 21 September, is at a critical stage. Clifford Chance was unable to comment.
However, City lawyers say the options available at such a late stage must be to mount a challenge under competition law, possibly starting with a complaint to the Office of Fair Trading (OFT) under Financial Services Act competition provisions relating to registered investment exchanges (RIEs).
One City partner was sceptical about the effectiveness of an OFT complaint. UK litigation or an appeal to the European Commission for interim relief under Article 85 or 86 remained options, he said.
A storm is brewing over the Stock Exchange's apparent aim to hamper the launch of Tradepoint, which will challenge its monopoly when it begins trading on 21 September. The Stock Exchange is opposed to abandoning its rules relating to market-makers – in particular Rule 4.18, which prevents market-makers in shares from displaying prices better than those shown on the exchange's own SEAQ electronic system.
The Stock Exchange rules could prevent Tradepoint from running its own “order-driven” electronic share-dealing service for institutions, the aim of which Tradepoint says is to complement, rather than compete with, the Stock Exchange.
Five exchange rules including Rule 4.18 were declared anti-competitive by the OFT and the Securities and Investments Board.
If Tradepoint complains then the OFT can file a report to the Treasury, which is due to decide in September whether to force the exchange to abandon its “anti-competitive” rules.
Tradepoint could try to judicially review any adverse decision by the Chancellor, said another City lawyer.
Clifford Chance and Boodle Hatfield have advised Tradepoint during the year on regulatory and commercial aspects respectively. Clifford Chance's team is led by Mark Harding, international financial markets group head, and partners Lynn Johansen and Nick Jordan.
The Boodles' team is led by corporate partner Andrew Drake.