London Stock Exchange begins migration to Linux-based trading platform

The London Stock Exchange has begun a twelve-month migration to its new trading platform, based on Linux, as trading fell sharply.

In a busy three months for the exchange, it also agreed a framework plan for its newly-acquired controlling stake in Turquoise, a large volume 'dark pool' trading platform.

The LSE suffered a heavy fall in sales of real-time trading data. While the group’s IT revenues, from selling information and server hosting, grew three percent to £55 million in the three months to 31 December, real-time data sales fell nine percent, nearly three million pounds.

Eighteen thousand fewer professional terminals took that data from the exchange, making the number of professional terminals in use fall below the 100,000 mark, to 93,000. It hit group revenues for the quarter, which fell nine percent to £155 million.

The exchange is gearing up for one of its most crucial years yet for technological change. At the end of the 2010, the Linux-based MillenniumIT trading platform, which the LSE gained by acquiring the Sri Lankan company for £18 million in September, will be switched on. It will replace the outgoing TradElect platform, based on Microsoft .Net architecture and upgraded by Accenture only two years ago at a cost of £40 million.

TradElect has a troubled history, with a number of high profile outages that have caused great embarrassment for the stock exchange. It is also understood to be significantly slower than specialist rivals such as Chi-X.

In spite of TradElect shortly being withdrawn, in November the LSE booked costs of £20 million on the platform, as it attempted to write it off its books and worked on upgrades to keep it competitive over its final year of operation.

The LSE told the financial markets today that “project work” was “underway” for the migration to MillenniumIT, as it reiterated that it expected significant benefits from the move.

The new platform would give it “high performance” trading, as well as an “agile, efficient, in-house IT development capability”, it said. And the increased level of money behind the operation, following its purchase by the LSE, would give it the “financial backing it needs” to grow sales of its software development and integration services to other exchanges.

Meanwhile, the LSE said it expected its acquisition of 60 percent of Turquoise to be complete by the end of next month, with the aim of “driving trading volume growth”. It committed to fully funding the cash needs of Turquoise under an agreed framework for its first two years, and expects to book exceptional costs of £20 million in the next year following the acquisition.

Xavier Rolet, chief executive, today called both the MillenniumIT and Turquoise acquisitions “good steps to enhancing” the LSE’s trading offering. The exchange now faces a major migration task over the coming months, and is betting its technological future on the new platforms.

Copyright © 2010 IDG Communications, Inc.

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