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March 1, 2003

Swiss Take Command, Dream of Euro Trading

By Staff Reports

The dream of a pan-European trading platform appears to have been achieved, but will it turn out to be a nightmare?

The SWX Swiss Exchange's takeover of Virt-x - along with its bold announcement that it is going to promote the Virt-x European platform at least for another year - has sparked a debate.

Is SWX's move premature or is its step coming at just the right time to take business away from established exchanges? Even some of the advocates of the pan-European exchange agree that timing could be a problem.

Lee Hodgkinson, director of operations at Virt-x, said it could have been different had Virt-x launched three years earlier, rather than in the middle of a market downturn. But Hodgkinson still thinks the pan-European idea is on target. That's despite Virt-x not having reached its early goal of 10 percent in European blue-chip trading volume. Hodgkinson contends that the migration of a Swiss national market is a signal event. It had never previously been attempted.

Skeptics claim that the acquisition proves that the Virt-x model is in trouble.

Alasdair Haynes, CEO of ITG Europe, which operates the POSIT crossing network in Europe, said that a new Virt-x entity won't survive today unless value is added. He said drawing liquidity from a national exchange is difficult.

SWX took control of some 90 percent of Virt-x recently, which was originally launched as a joint venture between Tradepoint and the Swiss exchange. Shareholders, which include a consortium of leading investment banks and securities holders, agreed to an offer of 12.5 pence per share from the Swiss exchange. The latter is delisting Virt-x shares from the London Alternative Investment Market and will acquire the outstanding shares.