E trading service LMAX opened for business yesterday, offering contracts for difference on US and European share indices, commodities and UK gilts.
The platform, which is majority owned by online sports gambling firm Betfair, adopts its parent’s model as a peer-to-peer exchange rather than a traditional broker.
It claims to be the first multi-asset trading venue that does not take up positions against its clients.
“We are bringing transparency and fairness to the market by providing an exchange platform and a business model that clearly wants its retail traders to be as successful as possible,” said LMAX chief executive Robin Osmond.
Osmond, the former global head of investment banking at HSBC, added that LMAX plans to launch similar platforms in Europe in 2011, before moving into Asian markets via a hub in Australia.
The firm said it has agreed with Goldman Sachs, which owns a 12.5 per cent stake in the firm, JP Morgan and electronic market-maker Optiver that these firms will quote buy and sell prices in the various contracts to ensure liquidity for retail investors.
It hopes to see trading activity from individual retail investors increase, with LMAX becoming less reliant on the brokers.
LMAX has also pledged to make prices public, in an effort to maximise transparency within the exchange.
Contracts for difference trades allow investors to benefit from a change in a share price without investing directly in the stock. Trades will be cleared through LCH.Clearnet.
Parent company Betfair floated on the London market on Friday, with shares jumping almost 20 per cent in the first day of trading to value the firm at £1.4bn. Its shares closed 0.2 per cent lower at 1,546.6p yesterday.