New alternative marketplaces that are gearing up to compete with traditional exchanges are staying clear of the exchange-aligned technology solution providers. In late October, Turquoise, the consortium led by seven investments banks to build an alternative trading system to the London Stock Exchange and other traditional European exchanges, chose Stockholm-based Cinnober Financial Technology AB to build its matching engine.

Rumors were swirling in the media that Turquoise was initially considering OMX. Turquoise was in talks with PLUS Markets plc, a competitive equity exchange in London, which uses OMX technology. But that decision possibly changed once Nasdaq expressed its intention to acquire OMX, operator of the Nordic and Baltic exchanges. “I think the Nasdaq-OMX transaction may have had some impact in pushing the Turquoise transaction closer to Cinnober,” observes William Cline, managing partner at , managing partner at Acai Solutions in New York.

Cinnober also developed a pre-and post- trade reporting system for Project Boat, the group of investment banks whose members overlap with Turquoise. The system went live on Nov. 1st in time for compliance with MiFID. “You could be sure the Nasdaq-OMX deal fostered additional debate,” says Cline, who notes that Turquoise is positioning itself "as the anti-exchange." Also, Cline notes that at one point, OMX was trying to acquire the London Stock Exchange, which is the exchange in Turquoise’s rifle shot.

A week after Turquoise’s decision, Alpha Trading Systems, a consortium of major Canadian broker dealers, (formerly known as Alpha Project), picked Cinnober to build an ATS for block equity trading that will compete with the Toronto Stock Exchange. “We are totally independent,” says Jan Arpi, CEO of Cinnober in Stockholm, Sweden. That independence seems to be playing to its advantage. Cinnober specializes in delivering exchange-trading technology (based on its TRADExpress Trading Platform) for a number of markets based including the American Stock Exchange; Borsa Italiana, Euronext Liffe, London Metals Exchange, and Chicago Board Options Exchange. (On Nov. 16, CBOE received regulatory approval to launch a new electronic system for trading index and equity FLexible EXchange (FLEX) Options, which are customized options. Cinnober developed the Internet-based trading platorm which was slated to go live last Tuesday, Nov. 20).

While the new ATSs could have licensed software from OMX or possibly from Atos Euronext Market Solutions (AEMS), the joint venture between NYSE Euronext and Atos Origins, instead we’re seeing the ATSs gravitate toward a non-aligned technology supplier.

Turquoise had the capacity to develop its own system but that would have taken a year or two and the market opportunity with MiFID was now, says Cinnober’s Arpi. Turquoise chose Cinnober over other technology players that are arms of exchanges like OMX or CME, the Cinnober CEO says. “If you are going to set up a new marketplace in order to compete with exchanges, I believe you would not *(put) too much trust in Chinese walls. You would prefer an independent provider,” says Arpi. Technology platforms owned by exchanges could be an issue in Europe, where alternative marketplaces known as multilateral trading facilities (MTFs) are a hot topic under MiFID. While Arpi says that independence is an important factor, “It’s not everything,” he concedes. “We wouldn’t be successful unless we had a competent technical platform to build upon,” he emphasizes.