Liquidnet and Deutsche Börse Join Forces

Terry Flanagan

Liquidnet has teamed up with Deutsche Börse in response to increased investor appetite for German securities and a shared challenge of trading in size without the unintended consequence of market impact. The new cooperation combines the price discovery of the lit markets with Liquidnet’s quantity discovery.

Deutsche Börse will launch a new block trading service on Xetra MidPoint and named Liquidnet, the global institutional trading network, as the Block Agent for this new service.

This new block trading model provides a platform where more than 240 Xetra members will have the opportunity to trade directly with Liquidnet’s network of more than 700 asset management firms safely with minimal market impact and maximum price improvement.

Xetra MidPoint’s Block Agent model will combine the liquidity of multiple sources, increasing the probability that large orders will be executed at midpoint.

“Connecting Liquidnet provides our members the opportunity to execute block sized orders in a manner that serves the specific requirements of this segment, with all advantages of exchange trading via Xetra MidPoint. The Block Agent model offers access to considerably greater block liquidity for Xetra MidPoint execution, increasing execution probability for all Xetra participants,” said Martin Reck, cash market managing director at Deutsche Börse.

All German shares that can be settled via the CCP may be traded using the Block Agent model, including those of the four selection indices DAX, MDAX, TecDAX and SDAX, as well as other small and midcaps.

“We have long championed borderless equity trading by opening up investment opportunities for our members in markets where they can create value and improve their investment performance,” said Mark Pumfrey, Head of EMEA, Liquidnet. “When combined with an average execution size of €1.1 million on our platform, the Xetra MidPoint liquidity will significantly enhance institutional block trading in German stocks. We believe this cooperation will make trading of these stocks more efficient, drive performance, and lead to an increase in foreign institutional investment.”

Xetra MidPoint allows trading participants to enter equities orders in a closed order book and to execute them at the midpoint between the best bid and best ask price in the open Xetra order book, without disclosing volume or order limit.

Xetra MidPoint thus enables market participants to execute larger orders on a market-neutral basis. Execution at midpoint between the best bid and best ask price reduces implicit transaction costs to investors. Price determination on Xetra MidPoint is fully transparent, thus also minimizing trading costs to participants.

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