Sweden's competition watchdog sues Nasdaq OMX for market abuse

The Swedish Competition Authority is taking legal action against stock exchange operator Nasdaq OMX Group, alleging that the firm's Stockholm Stock Exchange abused its market dominance to the detriment of a rival – Burgundy – that catered to high frequency traders.

The antitrust agency, in a 28 May statement, has demanded that Nasdaq OMX pay 31m kronor (£2.4m, €3.3m, $3.6m) in penalties and administrative fines.

The watchdog said: "The Stockholm Stock Exchange/Nasdaq OMX abused a dominant market position when they prevented the trading platform Burgundy from using a vital data centre...

"When...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..."

The regulator added: "High-frequency trading [HFT] 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."

Competition Authority Director-General Dan Sjöblom commented: "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."

Pursued by Bloomberg, Nasdaq said it cannot discuss such cases while they are being handled.

Christina Malmberg Haegerstrand, a spokeswoman for Nasdaq OMX in Stockholm, told the news agency: "This is an ongoing process that we don't comment on. We have cooperated with the Swedish Competition Authority during their investigation and we will continue to cooperate on this matter."

Last month, the owner of Oslo's stock exchange shut down Burgundy after buying the trading platform, a venue for Danish, Finnish and Swedish stocks, from a clutch of banks in 2013.