28th Jul '09 by StrollingMolby

25 comments 12099 reads

A thread for general discussion of the company and developments that affect it.

Background

The roots of PLUS Markets Group lie in the market formerly known as Ofex, which was founded in 1995 as a facility for trading shares in unlisted companies. PLUS Markets Group plc was born in November 2004, following a refinancing and the appointment of a new Board and management team of Ofex Holdings plc.

In 2007, PLUS was granted Recognised Investment Exchange (RIE) status by the Financial Services Authority, making it a fully competitive UK-based stock exchange, offering a deep pool of liquidity by supporting small order flow at low transaction cost and able to offer a full range of trading and listing solutions. RIE status is an internationally-recognised benchmark, opening the market to those investors who prefer to execute their investment business through an RIE.

The range of securities available for trading on the PLUS market numbers some 7,500 including full coverage of London-listed shares including the FTSE 100, European liquid shares and unlisted shares quoted on the AIM and PLUS markets. PLUS has been enjoying strong trading activity since the launch of the new trading platform in November 2007 with bargains and volumes soaring to new highs.

http://www.plusmarketsgroup.com/PLUS_IR_overview.shtml

Competitors

Plus’ main competition is undoubtedly from the London Stock Exchange, as well as from Chi-X, Turquoise, BATS Europe and Markit BOAT. Plus has been making large in-roads to the small cap end of the spectrum, but the exchange is also seeing volume move to PLUS for FTSE 100 companies too – for example, during the first half of 2009 between 20% - 30% of RBS, Lloyds and Barclays trades have been routed through PLUS.

Trade data

Trade data from PMK reveals how their volumes and market share is growing:

	Bargains	Trade Value (£m)	No. of Shares	Market Share by Volume *
Jan-08	397,419	2,893.84	1,738.03
Feb-08	354,066	2,897.62	1,638.44
Mar-08	364,030	3,038.04	2,879.98
Apr-08	389,681	3,131.50	1,951.93	2.51%
May-08	327,054 …

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StrollingMolby

15th Aug '09

I now have the LSE data for July, so comparing them side-by-side looks like this:

PLUS Markets
http://www.plusmarketsgroup.com/pressreleases/PressreleasePMG200908TradingFiguresJuly09Final.pdf
Bargains = 619,738 (-9.6% month-on-month, +73.8% year-on-year)
Trade Value = £4,697m (-3.5% MoM, +67.2% YoY)
No of shares = 4,850m (-11.6% MoM, +129.5% YoY)

LSE
http://www.londonstockexchange.com/statistics/historic/trading-summary/trading-summary.htm
Bargains = 12,046,024 (-15.2% month-on-month, -33.3% year-on-year)
Trade Value = £119.91bn (-13.7% MoM, -48.6% YoY)
No of shares = 56,593m (-12.2% MoM, -27.3% YoY)

It can be seen that PLUS is certainly gaining business year-on-year, whilst LSE is losing volumes. However, it can't be determined what proportion of market share each exchange has without data from Chi-X, Turquoise & Markit BOAT.

loglorry

Agreed it does look like Plus is gaining market share but we are comparing a rowing boat with a super tanker here. Trade value for LSE is 25 times as big. Number of bargains 23 times as big. Put another way a 5% decline in LSE is almost all PLUS volumne. So Plus may be snapping at LSE's heels but it is a stretch to say from these figures that LSE is loosing out to PLUS. Not that you did say that but I thought it worth mentioning.

17th Aug '09

Hi loglorry,

Yes, totally agree it is David & Goliath stuff. PLUS are increasing their share of a massive market, whilst I suspect a lot of volume is leaving the LSE for Chi-X and Turquoise. This Telegraph article today highlights that July was the LSE's worst July in five years and lowest volume since December 2007:

http://www.telegraph.co.uk/finance/markets/6039639/LSE-trades-plummet-amid-fears-of-switch-to-dark-pools.html

LSE trades plummet amid fears of switch to 'dark pools'

The London Stock Exchange has endured its worst July for equities trading in five years – sparking fears that major investment banks are switching to automated trading systems that bypass traditional exchanges.

doverbeach

A quote from telegraph article:

The real damage here is that the market has become a lot less transparent than it used to be. I suspect at some stage a solution will be found, but somebody has to put it all together," said Mr Kavanagh.

I think this is correct. All the various exchanges will have to supply information to an aggregator. Which may well put a big hole in the current Plus Markets business model, which is more data than trade orientated.

19th Aug '09

Interesting exchange industry news this week with reports circulating that Turquoise Trading is up for sale via UBS.

http://business.timesonline.co.uk/tol/business/markets/article6801607.ece

Turquoise starting operating only one year ago having been backed by the major investment banks, who still hold their stakes. An agreement to make a market in all shares offered on Turquoise expired back in March, whereupon the banks stopped trading all of those instruments, and Turquoise has been unable to make up the lost volumes.

If it really is an exchange in decline then it would be worth the other exchanges letting it go to the wall (rather than acquire it) and pick-up market share for nowt. In any case, it seems to have served one of its initial purposes - to drive down the costs charged by rivals and to have them reintroduce volume discounts for the investment banks, which is what the LSE has recently done.

What does this mean for PLUS? Well, a rival losing volume or even dissappearing is good news on the face of it. However, should there still be too much competition out there for volume that is lower than a year ago when new exchanges sprung up, then there may still be too much slack in the system and others may yet suffer too.

I'm willing to hold on to my PMK shares for now to see the outlook statement in the interims in mid-September, as well as the benefit gained from 1 September when PLUS can readily compete with LSE on AIM trading and include such data in its data offering.

double post

fordtin

24th Aug '09

Can anyone explain why every AIM listed company I have looked at today has made it's first trade on the plus market either Friday or today? Has their been a rule change, or maybe one or more market makers deserting the AIM market? The charts shown on the plus site all seem to start roughly 2 months ago.

a few examples;

http://www.plusmarketsgroup.com/details.shtml?ISIN=VGG3032P1036/GBX/PLUS-exn

http://www.plusmarketsgroup.com/data.shtml?ISIN=GB00B117S132/GBX/PLUS-exn

http://www.plusmarketsgroup.com/data.shtml?ISIN=VGG651971084/GBX/PLUS-exn

http://www.plusmarketsgroup.com/data.shtml?ISIN=GB00B0P4LQ95/GBX/PLUS-exn

http://www.plusmarketsgroup.com/details.shtml?ISIN=IE0004678326/GBX/PLUS-exn

fordtin,

Thanks for pointing out that this transition has now occurred - this is the awaited news that PLUS can now offer trading services to all market makers in all AIM securities (this was due by 1st September at the latest).

PLUS was in dispute with the LSE over trade reporting and a planned court date was not needed when PLUS & LSE announced a resolution of the dispute on 29 May. The fact that you have now seen companies traded on PLUS for the first time indicates that market makers are looking to trade on PLUS where there are no execution fees (the membership fees are lower than LSE, and others AFAIAA). I've been away from a computer today but this development could be the reason for the rise in the price today?

Thanks StrollingMolby,

someone on ADVFN kindly dug the following out for me.

PLUS to trade all AIM stocks after resolving LSE spat
Fri, 2009-05-29 11:21
UK exchange group PLUS Markets has resolved its long-standing legal battle with the London Stock Exchange (LSE), allowing PLUS to trade all the stocks listed on the LSE’s AIM small- and mid-cap segment.

The dispute centred on an LSE rule on AIM trading, which required trades in AIM stocks conducted away from the LSE to be reported to the LSE. PLUS argued that this rule effectively prevented the trading of the roughly 1,600 AIM securities on PLUS, save the 90 AIM companies that had elected to be dual-traded on AIM and PLUS. On 19 September last year, PLUS filed an action in the UK High Court challenging the rule.

Under the resolution, PLUS will provide real-time trading data to the LSE to support the exchange’s role in regulating AIM companies and ensuring their compliance with its rules. In turn, market-makers will be able to quote and trade-report in all AIM securities on PLUS’s markets without any additional trade reporting requirements to the LSE.

The LSE will make changes to its rule-book to give firms the right to choose whether to trade AIM securities under PLUS or LSE rules. PLUS said this will allow its main market and PLUS Europe, its pan-European trading platform, to operate as independent execution venues.

The agreed structure, including rule-book changes, will be implemented as soon as possible and by 1 September at the latest.

PLUS believes its ability to trade the full range of AIM stocks will attract institutional traders to connect to its PLUS Pool non-displayed trading architecture for small- and mid-cap stocks.

http://www.thetradenews.com/trading-venues/exchanges/3228

6th Sep '09

PLUS issued this RNS on Friday after hours concerning a Middle East tie-up and subscription, (related) board changes, and a trading update. There's good and bad within the announcement, which I believe should be viewed as thus:

PLUS points

Commercial venture with a syndicate of Middle Eastern investors to promote PLUS in M.East
Placing of 73.3m shares with syndicate at 7.5p raising approx £5m
AIM trading via PLUS has seen large uplift in volumes since 21 August
2010 operational costs expected to be scaled back
Balance sheet strengthened - still debt-free

Neutral

Warrant issued for syndicate to buy 58m shares at 5p dependant on revenue from business introductions criteria
Two new NEDs to be appointed from syndicate, replacing two existing NEDs

Negatives

Exceptional legal costs for LSE dispute - quantum to be revealed in results in 2/3 weeks
Balance sheet is weak before above placing
Primary markets dead

The key story for me is one that was already known to the market (though perhaps not widely) that the dispute with the LSE, settled in May, now sees trading in all AIM stocks via PLUS, in addition to the fully-listed LSE stocks. That can only be a benefit when liquidity produces a more efficient market on PLUS, though with the revenue model at PLUS, it needs take-up of the data services by market makers to really catapult PLUS into one of the top execution venues in London. The ability of PLUS to incentivise market makers through new initiatives to use its platform will be of the utmost importance.

The announcement of the new relationship with the Middle Eastern syndicate, Amari Dhari Investments, bodes well that new business can be imported to PLUS London, as well as the opportunity to develop it's exchange platform business in the Middle East.

From the Financial Update, I am worried about the level of the legal costs that will be booked into the results to 30 June, and hope they don't surprise on their scale. Also, the fact that the primary markets are pretty much inactive on PLUS means that this revenue stream is probably currently nil.

How the market views this RNS is anyone's guess but expect some volatility on Monday.

7th Sep '09

Presumably primary markets is the main source of their current revenue?

It will be interesting to see the legal bill - running up these costs of course couldn't possibly have been the reason that the LSE persisted so long with refusing access, could it? :(((((

I was involved in a similar situation in the 90s, where one of the companies concerned was very close to going to court to get an injuction for the LSE to cease trading on the grounds that in was in beach of freedom for cross border trade under the Treaty of Rome - in addition to the 'normal' legal bills this involved getting in (a) experts on EU law and (b) starting to put together a litigation team. I was looking forward to it, but unfortunately the LSE backed down in that case too! Luckily then part of the legal costs were being bourne by a different company, not the nascent exchange.

It will be interesting to see the legal bill - running up these costs of course couldn't possibly have been the reason that the LSE persisted so long with refusing access, could it?

Very true, db - the team at LSE aren't stupid, so if they could drive a competitor out of business by dragging out litigation before settling out of court beforehand, I'm sure it is a tactic they'd try.

The market seems to like the RNS so far (good idea of PMK to reissue it this morning - a Friday night RNS is never a good idea!) with the price up 15-20%. Looking forward to the August trading data when released this week.

Wow - the YTD data has just been released on the PLUS website (and entered in the header) from which August data can be extrapolated:

	Month-on-Month	Year-on-Year
Bargains	+39.7%	+210.8%
Trade Value (£M)	+38.9%	+191.0%
No of shares	+76.7%	+456.9%

The last week of August must have really provided a boost to volumes once the AIM-restriction was overcome.

8th Sep '09

The LSE is fighting back in response to the progress made by the more nimble exchanges eroding their market share (Chi-X and BATS especially), by cutting staff numbers by 10% and changing its fee structure.

http://www.ft.com/cms/s/0/9f2490cc-9be5-11de-b214-00144feabdc0.html

CEO Rolet states (with my emphasis in bold):

“We are looking at everything from co-operating with another exchange, licensing some technology from other exchanges and acquisitions. We have to [upgrade] because the technology specifications are no longer competitive and that’s impacting our ability to support volume growth.”

He acknowledges that time is not on his side and the LSE is vulnerable. But he says his plan is to grow the LSE to the point where it is no longer a target, but can hunt for prey itself. The LSE has £370m in loan facilities at its disposal.

Mr Rolet says: “I am convinced consolidation is going to come back. We need to convince the market in the next six to 12 months that we can be credible in more than just UK and Italian cash [equities] and if we do that and grow our valuation then we potentially will be in a position where we could do deals that don’t necessarily involve the LSE being basically scooped up and ending up on someone’s lunch menu.”

In the medium-term I would suggest there will be a lot of consolidation (Europe-wide) given that there are125 multi-lateral trading facilities registered with the Council of European Securities Regulators since MiFID came into force in late-2007.

Good graphic on FT.com of the fragmented European trading markets http://www.ft.com/cms/s/0/b4edf120-9bbb-11de-b214-00144feabdc0.html

Also, they have a new Trading Room section http://www.ft.com/markets/trading-room

I shall add both to the header.

15th Sep '09

PLUS Markets has finally issued its August trading report and it shows continues progress for the young exchange.

PLUS Markets Group today announced record UK equity activity for August. Year-on-year, bargains increased 210% to 865,275 while trade value rose 190% to £6.50 billion and number of shares went up by 454% to 8.524 billion – new record highs for both value and volumes for the exchange.

The August volume number represents over 10 per cent of total UK equity trading on all venues.
29% of all FTSE Smallcap trades by volume
47% of FTSE Fledgling by volume

32% of all RBS trades

http://www.plusmarketsgroup.com/pressreleases/PressreleasePMG200909TradingFiguresAugust09Final.pdf

NB: the data (& %age increases) have been reduced slightly from that worked out in my post of 7-Sep, extrapolated from the total trade data posted early on their website.

14th Oct '09

The September propaganda trading report has finally been released, and it is a case of lies, damned lies and statistics ! :o)

The September numbers are greatly down on August data (entered above in the header), despite having a full month of AIM-trading in this month, rather than the one week or so when PLUS was able to make a market in AIM securities.

	Month-on-Month	Year-on-Year
Bargains	-24.2%	+17.9%
Trade Value	-47.3%	-23.0%
No. of shares	+17.0%	+276.3%

With this in mind, PLUS decided to focus on quarterly data:

PLUS Markets Group announced a strong surge in reported flow for the third quarter of the year, illustrating its continued growth in the UK retail market. Trading numbers were up 270% in Q3 against same period in 2008.

September was a particularly strong month for volume, with PLUS reported flow just shy of 10 billion shares for the month.

And for the first time in living memory (which is about six-months for me!) the LSE data for September trumps PLUS hands-down (though the Y-o-Y comparisons are awful):

	Month-on-Month	Year-on-Year
Bargains	+13.6%	-35.9%
Trade Value	+27.1%	-41.4%
No. of shares	+40.6%	+4.1%

I'm still a fan of PLUS and have a long-term view that the exchange is well-positioned in the mid and small-cap retail trading space, but wish the monthly reports displayed consistent comparative data (though they never will!).

23rd Oct '09

Have added a video interview in the header in which CEO Simon Brickles talks about the benefits to companies of joining PLUS.

10th Nov '09

A couple of iBall interviews with CEO Simon Brickles entered at the foot of the header.

25th Aug '10

Plus Markets to restructure and launch derivatives trading

http://www.ft.com/cms/s/0/465df182-b029-11df-939d-00144feabdc0.html

Results of strategic review:

Key highlights

* First phase conclusion: no further funding required for existing business

* Costs reduced by 40% to annual level of below £5 million from 2011

* Working capital for next two years

* Board plan to break even within two years

* Second phase conclusion: identification of new revenue streams

* Broader product offering for small and mid-cap companies to include debt

* New Retail Service Provider ("RSP") hub, bringing trade execution onto PLUS

* Product extension through launch of the PLUS Derivatives Exchange ("PDX")

* Investment in new technology

Cyril Theret, Chief Executive Officer of PLUS Markets Group plc, said: "This strategic review has allowed the new management team to analyse the rapid evolution of market regulation, technology and user preferences, and make some clear decisions about the future direction of the Company. We are creating a competitive stock exchange with an attractive product offering to meet the needs of today's market users. Within that context, we remain committed to our core franchise of helping smaller companies to raise capital and retail investor services."

In other exchange industry news, Chi-X has announced that it has received an approach from a third-party, believed to be one of Nasdaq OMX, Deutsche Borse or BATS Global Markets.

PLUS Markets: Taking market share

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LSE trades plummet amid fears of switch to 'dark pools'

The London Stock Exchange has endured its worst July for equities trading in five years – sparking fears that major investment banks are switching to automated trading systems that bypass traditional exchanges.

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