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Pension funds “cold” on trading platform plan

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EUROPE - Plans by a group of investment banks to set up a new pan-European equity trading platform have met with a lukewarm reception from pension funds.

Citigroup, Credit Suisse, Deutsche Bank, Goldman Sachs, Merrill Lynch, Morgan Stanley and UBS today went live with plans to set up the platform by November 2007, exploiting provisions in the EU's Markets in Financial Instruments (MiFID) directive.

They said competition from the new system would drive down charges and deliver better buying and selling prices.

Nonetheless, pension funds throughout Europe had a tepid reaction.

PME, the pension fund for Dutch metals and electrotechnical engineering industry employees, said the move will not affect its trading.

"All our investment management is done by external managers, so we do not trade ourselves; in that sense the news leaves us completely cold," a spokesman for the fund said.

He added: "But it is of course possible that investment managers will be able to work at a lower cost and if our external costs will decrease because of that we are happy about such a development."

The National Association of Pension Funds had not heard anything about the plans yet, nor has it been consulted by any of the banks.

However, Jonathan Hoffman, policy adviser investments at the NAPF, said: "Anything which promised a reduction of dealing costs for pension funds would be welcome, but clearly what they are doing is ahead of the implementation of the MiFID and anything which increases competition in dealing with equities for pension funds should be a good thing, because it will bring dealing costs down."

Though pension funds and their representatives may be tentatively positive, the traditional stock exchanges are less than happy about the news.

LSE, under pressure from Nasdaq's takeover attempts, is trying to build its defences against Nasdaq, which already owns 25% of the LSE.

Elsewhere it appeared that Deutsche Boerse would withdraw its bid for Euronext, which is currently trying to cut costs.

A spokesman for Citigroup told IPE this morning that the collective is now recruiting its own management team, independent from the founding investment banks.

Also they will start consulting broking firms and investors in the following weeks.

"No date has been set," the spokesman said, but the platform is expected to be launched in November next year.

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