John At The Center

Goldman Sachs Group Inc., Morgan Stanley and investment banks in Europe are using the early success of new trading platforms they have backed to push exchange fees lower.

The companies have won new clout by backing alternate trading platforms such as Chi-X Europe Ltd. and Turquoise and by urging rival bourses to set up shop in Europe.

“Exchanges were monopolies,” said Ashok Krishnan, managing director of execution services at Merrill Lynch in London. “That chain has now been broken. They have to react differently.”

As trading algorithms and computer systems grow more sophisticated, orders are sliced into smaller and smaller pieces so they can more easily find the best match. This means that while the value of trades is declining, brokers are trading more to execute them. That’s part of the reason exchanges are enjoying a boom in volumes, which translates into higher costs for brokers.

http://bloomberg.com/apps/news?pid=20601109&sid=aYIPCla.Ufg8&refer=home