London Stock Exchange cuts trading prices as cheaper rivals close in

It has been a torrid year for those trading on the London Stock Exchange (LSE) and it is not getting any easier for the company behind the City’s biggest equity market.

Although the LSE has benefited from frantic trading sessions, new trading platforms are threatening to take away some of its business.

Yesterday the group unveiled its strategy to compete with its cheaper investment bank-backed rivals, such as Chi-X and Turquoise, which is set to launch this year. The LSE will cut fees, such as its 7½p execution charge and 1p order charge, and give credit to those who offer up big deals providing liquidity, with the aim of attracting big traders as they shift towards more computerised algorithmic trading. New tariffs, the first for 18 months, will be introduced on September 1, just before Turquoise’s full launch, and come after Chi-X recently claimed to have taken over 15 per cent of trading in FTSE 100 stocks.

The LSE claims that it will be the cheapest trading venue in Europe for big users, although this will be true only for those trading huge volumes both ways. In theory, the cuts will cost the exchange £5 million per quarter to implement, based on first-quarter volumes, although it hopes to make this up in higher trading volumes.
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Analysts at Bernstein welcomed the new pricing, which the LSE says is not a direct response to competition but to changing trends, as an intelligent response to the threat of losing market share. However, LSE’s shares dropped 15p to 816p, with investors underwhelmed by the move that many will have seen as inevitable, with the LSE in a no-win situation. Overall, the FTSE 100 slipped 57.2 points to 5,354.7, falling late in the day after poor economic news from across the Atlantic and amid rising oil prices (again).

Miners, which have supported the index this week, were on the back foot, with many tracking weaker commodity prices. Antofagasta fell 31p to 547½p, Vedanta Resources was 107p lower at £19.11 and Kazakhmys slipped 76p to £14.23.

Competition concerns hit BHP Billiton, down 88p to £16.05, and Rio Tinto, 293p lower at £50.47, after an executive of the China Iron and Steel Association repeated the group’s stance against a combination of the miners. The comments came as a new antimonopoly law took effect in China, the world’s largest steelmaker and the consumer of about half of global iron ore production. BHP has filed with Chinese competition authorities for its proposed $170 billion (£86.1 billion) takeover of Rio, but there are concerns that new laws may throw up uncertainties regarding potential approval. A European Union competition ruling is due this year. After hours, Rio said that it had received a letter from the President of Guinea purporting to rescind its Simandou mining concession.

Kingfisher, the B&Q owner, was the FTSE 100’s biggest riser, up 5.8p to 124.2p, after it sold its underperforming Italian operations for £440 million.

British Airways rose 3¾p to 259p, despite reporting a huge profit fall, as traders covered their short positions.

New York: Shares fell as oil price rises and a quarterly loss at General Motors added to worries about the economy. At the close the Dow Jones industrial average was down 51.70 points at 11,326.30.