Electronic Block Volumes Double
Total European electronic block trading volumes have doubled from last year ahead of changes in market structure when new regulations come into force in January.
Broker ITG said the total volume of electronic equity block trades in Europe rose from €20bn ($23bn) in the first quarter of last year to more than €40bn in the first three months of this year. Volumes were aggregated across Liquidnet, ITG Posit Alert, Turquoise Plato and Bats LIS.
Duncan Higgins, head of electronic products in Europe at ITG, told Markets Media that the shift to block trading has been taking place since 2012 due to a range of factors.
“There is a greater understanding of the cost of implementing orders,” he added. “The unbundling trend led to more electronic execution of blocks and venues are adapting to new approaches under MiFID II.”
Under MiFID II, the new regulations covering European financial markets from January, broker crossing networks will shut down and brokers will not be able to cross client-to-client business in their systematic internalisers. There are also caps on the volumes of total trading in dark pools, although there are waivers for trades which are defined as large in scale.
Higgins expects new trading algorithms to develop under MiFID II. “There will be new algos to access multiple SIs,” he added.
In April ITG added to the innovations around electronic block trading for equities in Europe by adding the ability for the sellside to post conditional orders for its institutional block crossing network, Posit Alert. Buyside users who choose this feature will be alerted to block opportunities when matches are found, giving them access to additional liquidity and minimising market impact.
In February Euronext, the pan-European exchange operator, announced it has formed a strategic partnership with AX Trading, a US fintech company and ECN, to launch a multi-lateral trading facility for large-in-scale orders in European equities in the middle of this year. The new Euronext offering is an electronic IOI service with sophisticated analytics for measuring best execution. Danielle Mensah, head of cash markets at Euronext, told Markets Media at the time that institutional demand for executing in the dark and for large trades is as high as ever and there has been a shift to electronic block trading.
Rival pan-European exchange Bats Europe licensed technology from Bids Trading, the largest block trading ATS by volume in the US, to launch Bats LIS and asset managers now have direct access.
Last year Plato Partnership, the non-profit group, agreed a cooperation agreement with Turquoise, the multilateral trading facility majority-owned by the London Stock Exchange Group, to bring together the buyside, sellside and a trading venue and increase efficiencies in anonymous European equity block trading.
Turquoise Plato Block Discovery set a new monthly record by value traded in March of €2.6bn, beating the previous record of €2.4bn set in February 2017, and a hung jump on the €0.20bn traded in March last year.
Rebecca Healey, head of Emea market structure and strategy at institutional block trading platform Liquidnet, interviewed 53 European-based global heads of dealing last year. She found that nearly half of the buyside respondents plan to increase their proportion of large in scale activity post-MiFID II.
She said in a blog: “The challenge for the buyside is understanding how the demise of broker dark pools as we know them will impact the future dark landscape – particularly given that three-quarters of respondents stated they had either received insufficient or no information from brokers as to how their dark pools will evolve into systematic internalisers post MiFID II.”
The strategies are the second launch of Northern Trust Asset Management’s ETF offerings in Europe.
With Thejas Nalval, Co-Founder and Chief Investment Officer, Parataxis Capital
Corporate Sustainability Reporting Directive elevates sustainability information to same level as financial.
Essentia analyses data to create behavorial “nudges” for fund managers' investment decisions.
With Adam Conn, Head of Trading, Baillie Gifford