London Stock Exchange Group (LSEG) and Turquoise Trading (Turquoise) have signed an agreement to create a new pan-European trading venture through a merger of the businesses of Turquoise and Baikal Global Limited (Baikal).

The new venture, an FSA regulated multilateral trading facility (MTF), will expand LSEG services across Europe in both lit and dark trading, and liquidity aggregation, with the express objective of driving European trading volume growth and promoting venue choice. It will benefit from synergies with LSEG infrastructure and the planned migration to MillenniumIT trading technology.

The merged entity will continue to trade under the Turquoise name. It will be 60% owned by LSEG and 40% owned by the existing Turquoise shareholders, who are global investment banking clients of LSEG. LSEG intends to broaden equity participation in the new venture by selling up to a further 9% of the issued share capital to other interested parties. LSEG will retain a majority shareholding in the new venture. The new venture will be built upon Turquoise’s existing pan-European lit order book and successful dark pool, as well as drawing upon Baikal’s product pipeline.

Eli Lederman, CEO of Turquoise, said: “Our partnership with London Stock Exchange Group is an important transaction for the next stage of Turquoise’s development. In our first 18 months of operation we have achieved a pan-European footprint in both lit and dark trading. With the support of London Stock Exchange Group we will be able to simplify our operational structure, attract a wider network and expand the platform’s product base.”

The transaction will be effected through the acquisition by a newly-incorporated subsidiary of LSEG of the existing Turquoise shareholders’ interest in Turquoise. In consideration for the transaction, the existing Turquoise shareholders will receive 40% of the issued share capital in the new company which will also become the holding company of Baikal. The transaction is expected to complete mid-February 2010, subject to satisfaction of all conditions to the agreement (including the receipt of all necessary regulatory clearances).

Turquoise will continue to be regulated by the FSA as an MTF under MiFID.