Euronext, the pan-European exchange, has expanded block trading as new regulations led to record volumes of large-in-scale trades and periodic auctions last month.
Veronica Taylor, head of Euronext Block, said:
https://twitter.com/veronica_enxt/status/1027828179040395265
MiFID II, which went live in the European Union at the start of this year, aimed to encourage trading on lit venues by introducing double volume caps on trading in dark pools. However, large-in-scale trading above a specified size has a waiver and so volumes of electronic blocks have been boosted. At the beginning of this month, Taylor said Euronext had set records for block trading:
https://twitter.com/veronica_enxt/status/1025386659691618304
https://twitter.com/euronext/status/1025021801699700736
Tim Cave, analyst at consultant Tabb Group, said in a report that July was a record for both blocks and periodic auctions, despite total average daily notional in European equity markets falling by more than one-fifth from June to €75bn:
https://twitter.com/_TimCave/status/1027119729578795008
“Many of the structural changes ushered in by MiFID II at the start of the year showed no signs of abating, even in the depressed volume environment,” he added. “Most notably, July was an all-time-record month for LIS, or block, trading, which accounted for 52% of Europe’s dark market and €1.39bn ($1.6bn) on a daily basis.”
Cave said this beat the previous record of €1.32bn in May, with block platforms run by Liquidnet, ITG Posit and Cboe LIS all enjoying significant volume increases.
ITG Posit said last month:
https://twitter.com/ITGinc/status/1019892469545259010
Cboe LIS, the European block trading platform owned by the US exchange, also had a record month in July:
https://twitter.com/CBOE/status/1025015188469280768
At London Stock Exchange Group, chief financial officer David Warren said on the second quarter results call: “Turquoise Plato Block Discovery Large in Scale value traded in the second quarter was €20bn, up 23% on €16bn in the first quarter.”
Regulatory concerns
However, the Autorité des Marchés Financier, the French financial regulator, has expressed concerns about the the development of LIS trading. The regulator’s latest Markets and Risk Outlook said some participants are waiting to aggregate enough small orders to maintain their ability to trade on dark platforms once the waiver size is reached.
The report warned: “This behaviour of postponing the execution of a client order in order to reach a LIS size that bypasses the double volume cap could directly harm the execution quality of client orders and violate the best execution obligation.”
The AMF continued that MiFID II’s objective of increased transparency is unlikely to be met as the market share of overall lit markets has remained almost unchanged at 46% since the regulation went live.
Stéphane Boujnah, Euronext
Stéphane Boujnah, chief executive and chairman of the managing board of Euronext, expects regulators to make changes to MiFID II if the objective of increasing lit volumes is not met. He said on the exchange’s first half results call this month that regulators are likely to focus on systematic internalisers. MiFID II banned broker crossing networks so that firms have to set up SIs in order to provide risk capital that facilitates trades.
“The systematic internalisers regime gave flexibility and their use is being monitored by supervisors,” Boujnah added. “Sooner or later, regulators will take a look and consider whether the current situation meets the intended framework and make secondary adjustments.”
