Auctions Surge Under MiFID II

Shanny Basar

Cboe Europe Equities had record volume in its periodic auctions book last month despite the delay in the caps on trading in dark pools under new European Union regulations.

The US exchange said in a statement that the Cboe Periodic Auctions book had another record month of volume in February. Average daily notional value was €353m ($438m) last month, almost a fifth more than in January this year. Total notional value traded on the Periodic Auctions book last month was more than €7.1bn, up from €6.5bn in January.

MiFID II, the European Union regulations which went live in January, places volume caps on trading of 4% of daily volume in an individual stock on any single dark venue as well as 8% of total average daily volume across all European dark pools in order to boost trading on lit venues. There are waivers for large-in-scale (LIS) orders and trading in auctions which has led to a boost in volumes of block trades and periodic auctions.

The European Securities and Markets Authority was due to publish details of the dark volume calculations in January but delayed publication until this month. However, the delay did not lead to a fall in block trades and periodic auctions.

For example, Nasdaq launched Auction on Demand in its Nordic markets last year to meet MiFID II requirements and volumes have been growing. Nasdaq said in its full year 2017 results presentation that Auction on Demand continues to gain traction in the Nordics.

“Trading using Nasdaq’s Auction on Demand has increased steadily since launching in June 2017 and average daily volume in January 2018 more than doubled compared to December 2017,” added the exchange.

Turquoise, the pan-European MTF owned by the London Stock Exchange Group, also launched frequent transparent auctions, Lit Auctions. The UK exchange said in its interim results for 2017 that Turquoise Plato Block Discovery had a 600% rise in total value traded to €54.5bn last year as customers started to adjust their trading strategies ahead of MiFID II.

Independent Broker ITG also launched Posit Auction, a lit segment on the broker’s Posit multi-lateral trading facility, when MiFID II went live. ITG said in its full year 2017 results presentation that in Europe average daily value traded in Posit in the fourth quarter was $1.2bn, up from $1.1bn in the same quarter of the previous year.

Frank Troise, president and chief executive, said in a statement: “ITG’s international operations are gaining momentum, as demonstrated by record results in Asia Pacific and strong performance in Europe and Canada. With the advent of MiFID II, we are well positioned to deliver even more value to clients globally as they work to achieve best execution and improve operating efficiency.”

A survey from ITG at the start of this year found that more than 80% of buyside traders polled expect strong block volume growth in 2018. “More than 86% of traders surveyed expect to interact with block trading venues in 1Q 2018,” added ITG.

In addition, more than 82% of traders polled plan to interact with dark MTFs in this quarter, while 80% plan to interact with periodic auctions.


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