London Stock Exchange imposes levy on rivals

LONDON (Reuters) - The London Stock Exchange (LSE.L) started charging a one basis point levy on trades from rival trading platforms on Monday, in an attempt to fend off new entrants.

In September, the British bourse cut trading fees by about 10 percent, introduced rebates and abolished order entry and management charges to reward members through a value-based discount scheme.

That allowed new trading venues, or so-called multilateral trading facilities (MTFs) like Nasdaq OMX Europe, to aggregate trades from small and mid-sized brokers to benefit from such discounts.

"This tariff is intended to benefit our members, who create our market. Business on behalf of other displayed markets will not be eligible for our discount scheme and will be subject to a different fee," said Martin Graham, director of LSE's equity markets in a letter to members on Friday, which was later sent to Reuters.

Market participants say the move is aimed at Nasdaq OMX (NDAQ.O), which launched its pan-European MTF on September 26.

Nasdaq OMX Europe is following a routing strategy that has proven successful in a previous quest to take market share from trading on the New York Stock Exchange.

The new platform routes any unfulfilled orders through Citi (C.N) to other trading venues, including the LSE and the Deutsche Boerse (DB1Gn.DE).

Nasdaq OMX Europe hopes to gain market share by offering small and mid-sized brokers a lower fee to trade on its new platform than on incumbent exchanges.

It cut fees for routing orders to the LSE by 70 percent to 0.25 basis point last month.

(Reporting by Daisy Ku; Editing by David Cowell)