Jiway, the internet-based European stock exchange due for launch in September, could halve the cost of cross-border equity trading in Europe for retail investors, says Jerker Johansson, head of European equities at US investment bank Morgan Stanley Dean Witter in London.

He was commenting on the early-February announcement of plans for the E100 million electronic exchange which is a joint venture between Morgan Stanley and OM Group, the Swedish-based operator of electronic equity and bond markets in London and Stockholm.

Equity analysts say Jiway’s launch ahead of other pan-European equity trading ventures should give it a crucial advantage. Jiway – the name is derived from a Chinese word for wisdom – could have a million customers, or around 10% of the overall European retail investor market, by 2003, they add.

Per Larsson,
president of the OM Group, and Jerker Johansson of Morgan Stanley

Johansson told Euro that current cross-border dealing costs for retail investors are so high that such trading rarely takes place. Jiway, however, will provide a single access point for more than 6,000 shares, primarily European but including 150 US shares, removing the need for investors to use a plethora of European stock exchanges. It will also provide trading, clearing and settlement services, he says.

Actual per-trade charges and membership fees will be decided closer to the launch of the exchange, whose chairman is Lynton Jones, former chief executive of London’s International Petroleum Exchange.

OM Group will provide the trading system for the venture, which is expected by its backers to pick up 50% of all online cross-border share trading by retail investors within two years. The two backers believe Jiway will be a major factor in an expected tripling of online equity trading volumes by 2003.

Morgan Stanley will act as initial market maker, although other brokers will be welcome, says Johansson. Jiway will be available first to brokers in the UK, Sweden and Germany and will be introduced to brokers in France, Switzerland, Italy and the Netherlands in 2001.

There are several competing plans to deliver cross-border European equities trading after Jiway. The US exchange Nasdaq, for instance, plans to launch European blue-chip trading before the end of the year. UK-based electronic exchange Tradepoint, which is backed by several investment banks including Morgan Stanley, intends offering trading in European blue-chip equities to institutional investors by the middle of the year.

The eight largest European exchanges are in an alliance that aims to allow brokers to trade the largest 300 European equities listed on all the exchanges on a single trading platform by November.