Plus Markets, the quote-driven trading system for AIM-listed stocks, has filed an action in the High Court claiming an LSE trade reporting rule is "anti-competitive".
Plus says it has issued proceedings in the High Court challenging an LSE rule which requires trades conducted on venues other than the LSE to be reported to the exchange.
This has the effect of preventing trading in AIM securities on markets other than the LSE, says Plus.
Plus says it considers this anti-competitive and is seeking a High Court declaration that the rule is null and void or otherwise unenforceable.
"Plus believes that the rule is unnecessary and disproportionate and the burden of demonstrating otherwise rests with the LSE. Consequently, it is Plus' case that the rule represents an abuse of the LSE's dominant position," says Jamie Whitehorn, director, regulatory strategy, Plus.
Plus says the process involves the High Court asking the LSE to answer these claims and the burden of justifying these rules is now on it.
The firm says that, although trading in AIM securities was not included in the provisions of MiFID, "this rule is archaic, anti-competitive and outside the spirit of MiFID".
Currently just 90 AIM companies out of 1600 are dual-traded on Plus.
The company has been urging authorities to look into the matter for some time and in today's trading statement says it is "disappointed" that government plans to liberalise trading in AIM securities in the wake of MiFID have not been realised.
Plus says HM Treasury "has not been able to date to pursue such proposals within the time-frame originally indicated to the company earlier this year".
Plus has also seized on the outage at the LSE earlier this month - when a computer glitch meant trading was suspended for nearly an entire day - as evidence of a need for change.
In a statement at the time of the outage, Plus said the "debacle is a perfect illustration of the need to introduce greater competition in the sphere of AIM and improve business continuity planning for London. It is only a matter of time before there is a similar outage and this underlines the urgency of allowing traders to access alternative platforms in order to execute their AIM business."
Plus says it will now push ahead with the creation of a new market, known as "Plus-Europe", a new pan-European trading platform for small and mid-cap stocks it is developing with the Munich Stock Exchange.
Plus-Europe will offer an attractive venue for the trading of all AIM securities, deploying the pan-European passport rights afforded to market operators under MiFID, claims the firm.
But Plus says the LSE trading rule it is challenging would prevent member firms of Plus-Europe that held dual-membership of the LSE from executing trades in AIM securities under its rules.
In a statement responding to Plus' move, the LSE says: "Contrary to Plus' contention, the exchange's regulatory requirements do not prevent Member Firms from executing trades in AIM securities on Plus, but implements a trade reporting regime which ensures transparency and the regulatory integrity of the AIM market, which is critical for issuers and investors. Plus Market's arrangement with the Munich Stock Exchange circumvents the FSA's regulatory regime. It also deprives AIM companies of any say in where their shares are traded."
Plus also posted its interim results for the six months to 30 June 2008 today. Pre-tax losses hit £2.41 million, up from £802,000 for the same period the previous year. However the board says this is in line with expectations, reflecting an increased cost base as the firm invests in technology and expand operations.
Plus shares were up 0.25 pence, or 2.8%, to nine pence, in morning trading.