• Germany's news in English

Scruffy Berlin looks to future in high finance

Michael Dumiak · 17 Sep 2009, 17:40

Published: 17 Sep 2009 17:40 GMT+02:00

Facebook Twitter Google+ reddit

The Börse Berlin, a stock exchange known in recent years mostly for light trading and continual self-reinvention, has now landed investment from massive Chicago hedge fund Citadel enabling it to tilt at some pretty lofty goals.

In five years, chief executive Artur Fischer says, Börse Berlin will be the European trading venue next to the big exchanges in London and Frankfurt. Berlin also aims to become a stiff competitor to other alternative trading systems like New York-based Chi-X, a successful multilateral trading facility and unit of Japanese securities giant Nomura. Chi-X Europe traded $300 billion worth of securities on its platform in the second quarter of this year.

“With the help of Citadel, we will be a significant exchange in Europe, in the magnitude of Chi-X and maybe bigger,” Fischer says.

The exchange business across Europe, from London to the Baltics, is in an extended period of flux. It’s marked by a maturing level of technological innovation and experience with alternative trading systems, with national economies still volatile, burdened under severe strain. Opportunities – and pitfalls – abound.

So after the dust settled on an abortive plan for Nasdaq Europe to monitor its quotes from Berlin, the Börse bought into a London-based trading platform called Equiduct two years ago. It now hopes that Equiduct will be its future meal ticket. Berlin Börse’s strategic position looked good enough for the $10 billion hedge fund Citadel to take an ownership stake a few weeks ago in the Equiduct system, leaving Berlin Börse with a diluted holding but still in place to operate it.

The investment by Citadel brings with it the big fund's resources and credibility as a market maker and liquidity provider. Bringing such liquidity means that if investors want to buy or sell stocks using Equiduct pricing and its trading platform, they are assured of finding a trading partner. Citadel's partnership with Berlin should reassure market participants that they will be able to trade in volume, should they so desire in the names listed on the exchange. This confidence is a critical factor in the success of any marketplace.

The firm is now, in effect, a very old start-up. What Equiduct does now is monitor the price quotes on a set of 860 listed names – blue chips like Siemens or SAP. Before recent regulatory changes in Europe, a stock like Siemens was traded in one defined venue. Now, Siemens securities are traded on many platforms: places like Chi-X, Nasdaq OMX and many other places. The price varies from venue to venue – in tiny amounts, tenths of cents, but still enough to make a difference to someone who is placing a large order.

Equiduct continually monitors the stocks it lists across all these venues and calculates an average and shows the best price from this data. If you as an investor deal with a bank in Germany or broker in the UK who is a member of the Börse Berlin, you can trade at this price. If you subscribe to the market data service, you can follow this data in real time on a big moving graph that looks like a spider.

Fischer walks out into the lobby of his Fasanenstrasse exchange and demonstrates. Though this Nicholas Grimshaw-designed building is the headquarters, most of the software factory running it resides in London, and there are no yelling traders. Fischer looks over an oversize monitor and calls up SAP from the 14th of July at 3 pm, when the markets are just opening in New York. He points to a block trade of 2,407 shares that went through at €29 – for €69,803 plus costs. Across the screen trading in another venue at the very same time, SAP went for €50 cheaper. Not much, considering, unless you do this every few minutes, or you’re uncomfortable telling your client you wasted his 50 clams because you didn’t look hard enough.

So, could Berlin wind up on Oliver Stone’s radar as the next den of hard and heavy financial dealing? The Börse has many challenges pressing against it. Traders are creatures of habit: a real liquid market like the one in Frankfurt moved on order of 97 percent of German equities last month, 92 percent of foreign stocks, adding up to 13 million transactions. That kind of traffic is sticky: traders go there because that’s where the action is, and they stay there.

But places like Berlin are giving rise to new kinds of exchanges and new decentralised, networked ways to do business. A big fund like Citadel has its own reasons for doing business with the Börse – its ownership stake in Equiduct is valuable – and many other large financial houses are launching new hubs and networks, propelled by ubiquitous broadband and a drive to exploit new niches in an unsettled environment. So, asks Fischer, why not Berlin?

Story continues below…

“You can be anywhere,” he says, pointing to a company called International Algorithmic Trading, a young firm with 12 employees specialising in complex automated trading.

It’s based on the outskirts of Hamburg. Fischer’s regulator is in Berlin, his systems are in London, clients in London and Paris. He mentions the BATS exchange, only four years old and now the third-largest equity exchange in the world. It’s based in Kansas City.

“So why do you have to be in an expensive place?” he asks. “From Berlin, you can be anywhere in Europe in two hours. It’s truly international.”

Michael Dumiak (news@thelocal.de)

Facebook Twitter Google+ reddit

Your comments about this article

Today's headlines
Creepy clown scare spreads to Germany
Two of the clowns were apparently equipped with chainsaws. Photo: Pedro Pardo / AFP file picture

Police said Friday five incidents involving so-called scary clowns had occurred in two north German town, including one assailant who hit a man with a baseball bat, amid fears that Halloween could spark a rash of similar attacks.

Student fined for spying on women via their webcams
Photo: DPA

Student from Munich fined €1,000 for spying on 32 different computers, using their webcams to take photographs, or record their keyboard history.

This is how much startup geeks earn in Germany
Photo: DPA

A comprehensive new survey of 143 startup founders shows how much you are likely to be earning at a German startup, from entry level all the way up to sitting on the board.

Man dies after beating for peeing near Freiburg church
The Johannes Church in Freiburg. Photo Jörgens Mi/Wikipedia

A middle-aged man from southern Germany has died after being attacked by a group of men who took umbrage with the fact he was urinating in the vicinity of a church.

The Local List
Seven German celebrities with uncanny doppelgängers
Former Berlin mayor Klaus Wowereit and actor Alec Baldwin. Photo: DPA; Gage Skidmore, Wikimedia Commons

Check out these seven look-a-likes of well known German figures - we admit that some are more tenuous than others...

Israel seeks to buy three new German submarines: report
A Dolphin class submarine. Photo: DPA

Israel is seeking to buy three more advanced submarines from Germany at a combined price of €1.2 billion, an Israeli newspaper reported Friday.

Here’s where people live the longest in Germany
Photo: DPA

Germans down south seem to know the secret to a long life.

More Germans identify as LGBT than in rest of Europe
Photo: DPA

The percentage of the German population which identifies as lesbian, gay, bisexual or transgender is higher than anywhere else in Europe, according to a new study.

'Reichsbürger' pair attack police in Saxony-Anhalt
File photo: DPA.

A "Reichsbürger" and his wife attacked police officers on Thursday, just a day after another Reichsbürger fatally shot an officer in Bavaria.

Five things not to miss at the Frankfurt Book Fair
Photo: DPA

From consulting a book doctor to immersing yourself in an author's world with the help of virtual reality, here are five things not to miss at this week's Frankfurt Book Fair, the world's largest publishing event.

Sponsored Article
How to vote absentee from abroad in the US elections
10 things you never knew about socialist East Germany
Sponsored Article
Last chance to vote absentee in the US elections
How Germans fell in love with America's favourite squash
How I ditched London for Berlin and became a published author
Sponsored Article
How to vote absentee from abroad in the US elections
12 clever German idioms that'll make you sound like a pro
23 fascinating facts you never knew about Berlin
9 unmissable events to check out in Germany this October
10 things you never knew about German reunification
10 things you're sure to notice after an Oktoberfest visit
Germany's 10 most Instagram-able places
15 pics that prove Germany is absolutely enchanting in autumn
10 German films you have to watch before you die
6 things about Munich that’ll stay with you forever
10 pieces of German slang you'll never learn in class
Ouch! Naked swimmer hospitalized after angler hooks his penis
Six reasons why Berlin is now known as 'the failed city'
15 tell-tale signs you’ll never quite master German
7 American habits that make Germans very, very uncomfortable
Story of a fugitive cow who outwitted police for weeks before capture
Eleven famous Germans with surnames that'll make your sides split
The best ways to get a visa as an American in Germany
jobs available
Toytown Germany
Germany's English-speaking crowd