Revamped NOMX Nordic dark pool shuns HFT
Northern European exchange
provider Nasdaq OMX Nordic has overhauled its dark pool to discourage
high-frequency trading (HFT) and broaden the liquidity available in it.
Nordic@Mid has removed the
500,000 Swedish kroner minimum order size obligation and will now match trades
on a price-size, rather than a price-time, priority basis.
In addition, all users of
the dark pool must connect using the FIX message protocol, which will discourage
HFT firms that generally like to connect to markets using specialised
low-latency connectivity solutions. “Our dark pool hadn’t really
taken off since launch, so we consulted with both buy- and sell-side firms to
see how we could improve the offering,” Björn Sibbern, head of Nordic equities at Nasdaq OMX,
told theTRADEnews.com. “Our members are now more technically ready to connect
to the dark pool than they were just over a year ago.”
On its first day of
trading (28 May), the new Nordic@Mid pool accounted for 0.5% of all Swedish
equity trading, and 13% of all dark trading in Swedish stocks, making it the
third biggest dark pool for the country’s equities.
“There are many dark pools around Europe, but one of
the key things about Nordic@Mid, is that it's a dark pool built in conjunction
with the Nordic trading community, with much of flow being derived from local
firms,” said Sibbern. “We have aimed to eliminate the fear of being pinged by
HFT firms through the size priority and the FIX connectivity requirement.”
While encouraged by further
differentiation between European dark pools, Mark Goodman, head of quantitative
electronic services at Société Générale Corporate and Investment Banking, said
further analysis would need to be done on the new Nordic dark pool before he
opted to send client flow there.
and multilateral trading facilities cannot decide on the participants that
trade in their pool, which makes it difficult to assume that dark pool
offerings will be made unattractive for HFTs based only on structural factors,”
said Goodman. “Other dark pools have
tried to discourage HFT, but have inadvertently made it attractive to these
types of traders in other ways.”
Nordic@Mid was originally launched
by Nasdaq OMX on 15 November 2010 for non-displayed trading in Swedish, Finnish
and Danish stocks. The venue matches orders at the mid-point price of the primary
exchange using MiFID’s reference price waiver.
Nasdaq OMX plans to extend
the new functionality of its dark pool to Denmark and Finland after further
consultations with its members in each country.