The Stockholm Stock Exchange/Nasdaq OMX abused a dominant market position when they prevented the trading platform Burgundy from using a vital data centre. The Swedish Competition Authority is therefore taking legal action against Nasdaq OMX with a claim for the companies to pay SEK 31 million in penalties/administrative fines.
When the trading facility Burgundy was established as a multilateral trading platform, they wanted to place their matching engine in direct connection with the trading equipment of their trading customers, which is in line with market practice. Nasdaq OMX then used coercive methods to exclude Burgundy from the data centre in Lunda, Stockholm, where the matching engine of Nasdaq OMX's Nordic marketplaces is located, along with the equipment of a large number of traders. As Burgundy were forced to place their matching engine in another data centre, their competitive position in relation to Nasdaq OMX was weakened.
“Abuse of a dominant position by foreclosing a new entrant from the market is a very serious violation of the competition rules,” says Competition Authority Director-General Dan Sjöblom.
Like many other European stock exchanges, the Nasdaq OMX Nordic marketplaces used to have a near monopoly. The EU markets were deregulated in 2007, but the former monopolies still hold a very strong position on the market. In 2010, when the infringement occurred, the Nasdaq OMX Nordic Stock Exchanges had between 73 and 86 per cent of the market for trading Swedish, Finnish and Danish equities.
“Companies that have previously held monopolies have a particular responsibility, as they start out with competitive advantages and market power. For Burgundy and its clients, this did not end well, as Burgundy no longer exists,” says Dan Sjöblom.
High-frequency trading, or “algo-trading”, of equities requires physical proximity between customers’ trading equipment and trading facilities. The cable length between trading and market equipment is of great importance. The physical location of equipment is therefore a crucial factor for being successful in the market.
After a complaint from Burgundy, the Swedish Competition Authority opened an investigation and carried out an unannounced inspection, also referred to as a dawn raid, in June 2011 to secure evidence. An extensive investigation was then conducted.
The Swedish Competition Authority has submitted a summons application to Stockholm City Court with a claim for the three companies Nasdaq OMX Stockholm AB, OMX AB and OMX Technology AB to be jointly sanctioned to pay SEK 30,968,000 in penalties/administrative fines.
For further information, please contact:
Jimmy Dominius, Press Officer, tel. +46 (0)8-700 15 80, or +46 (0)76-542 15 80
Per Karlsson, Chief Legal Officer, tel. +46 (0)76-542 15 56
Marie Östman, Legal Counsel, tel. +46 (0)8-700 15 38
Katarina Magnusson, Counsel, tel. +46 (0)8-700 16 43
Martin Mandorff, Head of Unit, tel. +46 (0)8-700 15 53