* Citadel's stake "significantly" over 50 percent
* Borse Berlin stake diluted, remains over 10 percent
* Citadel to offer its stakes to retail banks
* Sees new structure bringing more retail trading orders (Adds comments from Citadel official, details)
By Daisy Ku
LONDON, July 21 (Reuters) - Citadel Investment Group, a Chicago-based hedge fund and trading firm, said it had taken a "significant majority stake" in cash equity trading venture Equiduct to attract retail trading business in Europe.
Citadel Securities, a unit of Citadel Investment Group, said it plans to offer some of its holdings in Equiduct, a retail-focused pan-European platform, to retail banks in exchange for order flows the banks direct to the platform.
Matteo Cassina, president of Citadel's execution business in London, said he expects Equiduct to replicate the success of Citadel's investment in Direct Edge, a U.S. trading platform, in the next few years.
"The time line in Europe would be longer, given the complications of clearing, the politics, the regulators, making it slightly more difficult," Cassina told Reuters in an interview, but added that it also creates barriers to new entrants.
Direct Edge has become one of the top four trading venues in the United States, along with NYSE Euronext, Nasdaq OMX and BATS Global Markets.
As a result of Citadel's investment, Borse Berlin, which acquired Equiduct in September 2007, has seen its 53 percent stake in the pan-European electronic trading platform diluted, but it remains over 10 percent, according to Cassina.
Venture capitalist Jos Peeter's 23 percent stake has been reduced to under 10 percent, according to Citadel and Equiduct.
Knight Capital and Goldman Sachs, who owned 3 percent and 1 percent in Equiduct respectively, have seen their stakes diluted to a insignificant percentage.
Citadel declined to disclose the investment in Equiduct, but said the investment would be enough to run the business for the next couple of years.
A typical new trading venue in Europe has a cost base of between 7.5 million and 12 million euros ($17.05 million).
The deal comes as market activity dropped sharply following the collapse of Lehman Brothers, and Equiduct has been running out of financial resources, according to industry sources.
Average revenue per trade in Europe has dropped to as low as 10 cents from 20 cents a few quarters ago amid heated competition among so-called multilateral trading facilities (MTFs) ventures including Chi-X, Turquoise, BATS Europe and Nasdaq OMX Europe.
With ownership changing hands, Equiduct will accelerate its official launch to provide retail investors with a consolidated best price.
"The partnership will allow Equiduct to leverage Citadel Securities' market making and client service capabilities as we implement a more aggressive roll-out of our services," said Artur Fischer, CEO of Equiduct and Co-CEO of Borse Berlin.
Some 30 to 40 percent of stock trading in continental Europe is from retail investors. According to Equiduct, some 20 to 50 percent of stock trading in Europe could have been executed on an alternative trading platform with better prices. (Editing by Rupert Winchester)