Plus to take trade fight to the LSE

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Simon Brickles, the chief executive of Plus Markets, the UK's stock exchange for small companies, will soon be able to compete head-on with the London Stock Exchange if he gets the go-ahead to offer trading in all 1,700 stocks listed on the Alternative Investment Market.

Mr Brickles said last week: "We are confident that by the end of the year we will have the necessary clearance to trade AIM companies on our platform. Our system is cheaper and more liquid.

"The days of the London Stock Exchange's monopoly on share trading are over. This is a much more competitive landscape and investors should be free to trade wherever they want – on Plus Markets or down the pub. "

Plus operates an order-book system run by market-makers which allows for a much more liquid market for small- to mid-cap companies.

The changes have been made possible by new regulations brought in earlier this year with the European Union's Market in Financial Instruments Directive (Mifid), which obliges brokers to put client business where it is the cheapest. Mr Brickles has had his plans approved by the Treasury but they are now being looked at by the Financial Services Authority.

At present, AIM is ring-fenced from EU regulations because when it was designed – by Mr Brickles, then its chief executive – it argued that it should be exempt.

But the London Stock Exchange, headed by chief executive Clara Furse, is understood to be making objections to the move as it does not want to lose its grip on trading. Mr Brickles added: "They are trying to delay this for obvious reasons."

The LSE is already under pressure from a number of other rivals, which is one of the reasons why its shares collapsed to a two- year low of 880p on Friday

Mr Brickles already trades shares in 80 AIM companies that have chosen to have their shares listed on the new market. He reckons Plus could conservatively add up to 50 per cent of all AIM stocks if it were allowed to trade them.

But he added that it is difficult to assess the impact on trading at the LSE as this varies according to the number of transactions reported.

Some analysts reckon it has already lost almost 40 per cent of its UK equities monopoly to Chi-X, Nasdaq OMX, Bats and Plus and faces a much bigger threat from Turquoise, the new electronic trading platform. Turquoise, which is due to start in September, is being funded by a group of banks that represent at least 50 per cent of all the LSE's trading volumes in the big blue chip stocks. One analyst has estimated that Turquoise could conceivably take up to 75 per cent of UK trading revenues.