The City has changed since Alasdair Haynes took his initial steps in as a young trader. Whereas Haynes may have been able to win his first position at a trading firm by proving he could still stand after drinking a bottle of white port, these days the glass-fronted office blocks are filled with driven youngsters with multiple degrees under their belts.
This changing culture partly inspired Haynes' latest venture. Having established trading technology group ITG's presence in Europe in the mid 1990s, before taking the reins as chief executive at equities exchange Chi-X, Haynes had acquired bucketloads of knowledge and a contacts network which spanned the City.
And as regulators began to pile on the pressure for firms to increase their transparency and accountability to investors, Haynes came up with an idea: he would launch Europe's first subscription-based equities exchange, breaking the opaque pay-per-trade model.
“I’m a passionate supporter of subscription – I believe the way it’s changing the way the world economies work,” says Haynes.
“I feel very strongly that financial services need to have that ‘Spotify effect’. Look what it used to cost to buy music 20 years ago – $30m worth of songs you can now get for $10 per month. I don’t see why, when cost is becoming such an important thing in our industry, people aren’t adapting to the subscription model faster.”
Already, Aquis has grown to a size where it has big-name banks such as UBS using its exchange. It has lured two per cent of equity trading in Europe to its venue, but actually lays claim to having 15 to 20 per cent of all liquidity in European blue chip companies on its venue at best (or equal to best) price.
Next step: Float
In a slightly Inception-style move, Aquis is now planning to list on the London Stock Exchange (LSE). Since the firm doesn't offer primary listings, it can't list on its own venue. Haynes added that seeking Regulated Investment Exchange status – which is what Aquis would need to do if it were to offer primary listings – “is not nor ever has been part of the Aquis business plan”.
But the LSE float will allow Aquis to raise £12m of new money to build its presence in the City, and pull in some new investors. Its current shareholders include private individuals such as flamboyant former Barclays banker Rich Ricci, and the Warsaw Stock Exchange (WSE) – which plans to offload its 20.3 per cent stake in the float after making what Haynes calls a “highly profitable investment”.
WSE invested in 2013 through a deal which valued Aquis at around £17m. The float, slated for mid- to late-June, is expected to value the challenger exchange at £73m – a fairly rapid scale-up.
A cleaner way forward
Aquis's subscription model, which starts at £2,000 per month and ranges to a maximum of £50,000 based on message traffic rather than value of trades, is the first thing that sets it apart.
“That gives them all their data, all their connectivity and all their trading across Europe,” Haynes explains.
He says some fund managers have been flabbergasted by this. If they become an investment bank's biggest trading customer, and do an unlikely 10 per cent of all that bank's business, the maximum cost the bank would be incurring on their behalf with Aquis would be £60,000 per year.
“Fund managers have said to me: 'I should be writing them a cheque of £60,000 for their trading? Everything else is add-on? At the moment we’re paying millions. I now need to find out exactly what I’m getting for the millions per year,'” says Haynes.
But Aquis also helps fund managers prove that they have won the best price possible for their investors, as it bans “aggressive” high-frequency traders which aim to capture fractional differences by trading quickly across different venues.
Eliminating such traders lowers the “toxicity” – a measure of the degree to which the price rises, or falls, while the order is in the process of being executed – of the venue, so traders can achieve a more reliable price.
Aquis, unlike most firms in the financial services industry, is therefore welcoming more regulation, and plans to use regulators' increasing push for transparency to continue its stellar trajectory.