Burgundy, the alternative trading platform launched by 13 Nordic banks in June 2009, is to be sold to the operator of the Norwegian stock exchange, heightening speculation that the sector faces a fresh round of consolidation.

Oslo Bors, which runs Norway's stock exchange, is set to wholly acquire the Stockholm-based Burgundy. The deal, announced by Burgundy in a statement this morning, is subject to approval by Swedish and Norwegian regulators but is expected to complete by the end of the year. Financial terms were not disclosed.

The deal comes at a time when the slew of alternative trading facilities - which were launched in the wake of the Markets in Financial Instruments Directive in November 2007 - are coming under intense financial pressure due to an overcrowded market place and weaker-than-expected trading volumes since 2008.

As reported by Financial News yesterday, the combined losses of Chi-X Europe, Bats Europe, Turquoise, Equiduct and Burgundy totalled nearly GBP30 million in their most recent financial statements.

As a result, there have been increasing signs of consolidation in the sector, with platforms either closing or merging with other operators. Turquoise was the first to be sold in February 2010, when it was acquired by the London Stock Exchange. Nasdaq OMX closed its Neuro alternative European platform two months later, while Bats merged with Chi-X Europe in November last year.

This consolidation wave continued in August of this year when interdealer broker Icap closed its BlockCross venue, citing weak activity.

Against this backdrop, speculation over Burgundy's future intensified last week, when Swedish bank Avanza, one of its shareholders, wrote off its investment in the platform. In its most recent financial statement, Burgundy platform reported a £900,000 loss on revenues of GBP6.2 million for 2011. In 2010, it made a loss of GBP5.8 million on revenues of £933,000.

Swiss exchange operator, SIX Group, was understood to be one of a number of parties in talks with Burgundy over a deal. However, Burgundy chief executive Olof Neiglick told Financial News that Oslo Bors had been "interested for some time," to create "a strong and viable competitor" to Nasdaq OMX, which operates exchanges in Sweden, Denmark, Finland and Iceland. Nasdaq OMX holds a 10% stake in the Oslo Bors group.

The merger will ally Oslo Bors's expertise in Norwegian listings, cross-asset trading and clearing, with Burgundy's secondary markets in over 1,000 Swedish, Finnish, Norwegian and Danish equities. The combined group would account for nearly 16% of Nordic equities trading, according to data from Thomson Reuters.

Under the terms of the deal, Neiglick will continue in his role as Burgundy's chief executive, reporting to Bente Landsnes, Oslo Bors's president and chief executive. Burgundy has also agreed to replace its current systems provider Cinnober with MillenniumIT, the vendor owned by the London Stock Exchange. Oslo is set to migrate MillenniumIT next month.

Neiglick said: "This is a great development for Burgundy and the Nordic markets as a whole. It gives us a simpler corporate structure, and a much wider distribution through the MillenniumIT platform."

He added the deal would allow Burgundy "greater ability to list and market listed instruments, including ETFs, structured notes and warrants." In parallel, Oslo Bors would "be able to extend its existing strong position in listing of bonds and equities into the broader Nordic market to an even greater extent," he said.

Landnes added: "Oslo Bors and Burgundy will work together to continue the development of a strong and effective Nordic platform for both investors and issuers, based on efficient, low-cost operations."

The Wall Street Jounal