Two years before Big Bang II hit London last October, transforming the London Stock Exchange's (LSE) strictly quote-driven dealer market, Tradepoint Financial Networks was started as a computerized, order-driven market. Buyers and sellers would simply meet electronically and negotiate their own prices. Tradepoint, which is officially recognized as an exchange, trades domestic U.K. stocks. However, it does not trade foreign stocks, like SEAQ International.
Tradepoint is officially recognized as an exchange and trades domestic U.K. stocks. Unlike SEAQ, it does not trade foreign stocks.
Tradepoint now trades 1,900 stocks, including those on the FTSE All-Share Index and fledglings. Customers include institutions, market makers and brokers, all trading anonymously.
To be sure, Tradepoint's volume pales in comparison to the LSE. And it has had its setbacks. It faced financial difficulties, and to remain afloat it was refinanced twice during the summer of 1997. One observer said the system still has problems, because market makers use the system only to print their trades.
For instance, Tradepoint might receive a small amount of revenue on 1,000 prints, compared with a much larger amount of revenue on 50 trades, albeit real trades. A Tradepoint spokesman said the latest refinancing brought investment from three large broker dealers, adding that they would not have invested unless they were confident about the exchange's future.
In late October 1997, Tradepoint applied to the Securities and Exchange Commission in the U.S. for permission to allow U.S. investors to trade directly on the exchange.
Market data giant Bloomberg confirmed that it would provide an electronic link for U.S. investors accessing Tradepoint, pending the SEC's approval of Tradepoint's application. Approval is expected this month. The link would be provided through Bloomberg Tradebook.