Spain’s BME opens high-speed London trading link
The BME is hoping to encourage foreign investors to trade with Madrid
Spain’s BME is poised to open a new trading route from London to Madrid, which it says will increase the speed of access to the Spanish stock market for investors in London.
From January 2015, the route will connect the Equinix London Slough Data Centre campus to the BME’s own data centre in Madrid with a latency of 11.3 milliseconds – a 20% reduction versus the current link. The new link is being operated through the BME’s technology subsidiary Visual Trader, and covers both equities and derivatives. The connection is the third opened by the BME in London, each using fibre optic cables that run by a different route.
The idea behind the initiative is to connect with foreign investors, who are increasing their share of the Spanish market and currently represent about 65% of value traded, according to the BME. The Spanish exchange claims its connection is about half the cost of the alternative routes which were previously established by providers such as BT Radianz. It also says that the new link has higher bandwidth.
“The new node will be a breakthrough in terms of speed, quality and ease of access to the Spanish cash and derivatives markets, helping to increase liquidity and closer ties between BME and financial institutions in London,” said José Parga, chief executive of Visual Trader, BME.
The fibre-optic technology behind the new London-Madrid link is not that fastest current method theoretically possible – microwave transmission is faster. But the BME has ruled out building a microwave link between the two cities for the time being, due to the high cost of the technology and the difficulty of overcoming natural obstacles, such as the Pyrenees mountains. Microwave technology can only trasmit data for short distances and requires frequent relays, which make it financially unviable for the moment, according to Parga.
The BME already offers co-location in Madrid for the most latency-sensitive traders, such as high-frequency trading firms.
The Spanish securities markets are currently in a state of transition. The BME has been losing market share to competitor BATS Chi-X Europe, which has used aggressive pricing to steal away market participants over the last couple of years. Meanwhile, the market is currently in the throes of a massive post-trade transformation, as Spain’s archaic settlement system is reformed and a planned equities CCP is due to be opened in October next year.
