Dark pool trading rocketed in Europe during January, with turnover on non-displayed multilateral trading facilities (MTFs) reaching their second highest total ever, according to data from Thomson Reuters Equity Market Share Reporter.
Dark MTFs, which include NYSE Euronext-owned SmartPool, UBS MTF, Goldman Sachs’ SIGMA X MTF and venues operated by BATS Chi-X Europe and Turquoise, traded €26.81 billion in January, higher than December’s total of €19.6 billion but just short of the €27.3 billion traded in August. Chi-Delta was the largest dark MTF last month, trading 21.3% of the total, ahead of UBS MTF, which traded 14.3% of dark volumes in January.
However, the proportion of dark trading last month was far more significant, reaching 3.87% of overall European trading turnover, compared to 2.3% in August and 3.3% in the last month of 2011. August was characterised by high volatility sparked by the European debt crisis that saw total trading volumes jump to a year-high of €1.14 trillion.
Overall trading volumes in January reached €690 billion, higher than December’s €586 billion – December is traditionally a weak month for equity trading due to seasonal variations – but lower than €867.3 billion a year earlier.
Lit trading on major MTFs accounted for €199.5 billion, broadly in line with previous months, with BATS Chi-X Europe, the dual MTF that was the result of a recent merger, accounting for over 80% of alternative venue trading turnover.
Major domestic exchange groups NYSE Euronext – which runs markets in France, the Netherlands, Belgium and Portugal – Deutsche Börse, SIX Swiss Exchange and the London Stock Exchange’s UK market, traded a total of €315.7 billion last month, higher than the €276.4 billion recorded in December but again lower than the €404.9 billion traded a year earlier.
BCN gains
According to US boutique brokerage Rosenblatt, which conducts a monthly analysis of dark pool trading in the US and Europe, Deutsche Bank’s SuperX broker crossing network (BCNs) was the largest non-displayed trading facility in December 2011, trading €363 million daily or 0.65% of overall trading for the month. Credit Suisse’s Crossfinder BCN was in second place, with €354.4 million traded daily (0.63% of overall trading).
According to Deutsche Bank, the growth of SuperX, which launched in 2010, is due to the growing depth of liquidity available in the system and increased use of its Stealth dark liquidity-seeking algorithm.
BCNs operate under a different regulatory structure to dark MTFs and are not included in the Thomson Reuters data.
The regulatory structure for BCNs is likely to undergo a substantial shift as a result of MiFID II, which is currently being debated by the European Parliament.
Under the new regime, BCNs could be formally categorised for the first time as organised trading facilities, a new venue class created by the latest version of the directive, prohibited from using proprietary capital and be subject to more stringent post-trade reporting standards. If implemented, the changes are likely to take affect during 2014.