It is not without precedent, the notion that those at the red end of tooth and claw capitalism can come together in mutually-beneficial fashion.
Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Morgan Stanley and UBS, were due to announce one such co-operative venture on Wednesday — a plan to build a joint platform to trade shares in Europe’s biggest companies at the lowest possible cost.
The news was enough to slice 2 per cent off the London Stock Exchange share price as trading commenced; Euronext fell 5 per cent initially, although the severity of the fall also reflected the fact that Deutsche Börse has pulled its offer to merge.
Past examples of brotherly behaviour amongst banks include Swift, the inter-bank funds transfer service, which has served as a back office platform for internecine inter-bank politics for more than 30 years. There’s also Visa, the the banks’ co-operative credit card venture, which has provided another arena for backroom financial wrangling.
More relevant, perhaps, is EBS, the forex trading platform created by a group of money centre banks in the early 1990s. That undermined (but did not overrun) Reuters’ electronic FX dealing service. The service is now owned by Icap, the big money broker, but in its mutual days EBS did provide a clear example that the banks can act together if they think they are being squeezed by outside system suppliers.
So what are the prospects for a new equities platform that challenges the near-monopolies enjoyed by the LSE in London, Deutsche Börse in Frankfurt and, to a lesser extent, Euronext in European exchange-traded derivatives?
The instant view on Wednesday tended towards a belief that this is organised sabre-rattling rather than a carefully honed attack on two hundred years of exchange history. In fact, the idea of banks making noisy threats to run their own trading show is suddenly all the rage.
Less than a month ago, for example, it emerged that a group of investment banks was looking to create a new derivatives trading platform in the wake of the planned merger of the Chicago Merc and CBOT.
The plan, of course, was to counter the implied hike in pricing power of the Chicago exchanges, but we haven’t heard much more about the banks’ concerted response since.
