Trading-technology provider Fidessa will work with Virtu to connect clients to the liquidity of the electronic market maker’s Systematic Internaliser, Virtu SI.
Systematic Internalisers emerged in the first iteration of Markets in Financial Instruments Directive; under MiFID II, the scope of SIs has expanded to include investment firms which, on an organised, frequent and systematic, and substantial basis, deals on their own accounts (principal trading) by executing client orders outside trading venues. The broad regulatory intent is to capture more off-exchange trading activity and increase transparency in OTC markets.
“It's clear that the new electronic liquidity providers, or market makers, in the U.S. are going to represent a meaningful pool of liquidity in the post-MiFID II world for a systematic internaliser regime,” said James Blackburn, global head of equities product marketing at Fidessa.
Blackburn noted that liquidity providers of this type have been operating in Europe for a number of years, mostly within the dark pools of large broker-dealers. “Now they are offering liquidity on a bilateral basis,” Blackburn told Markets Media. “These venues look very much like exchanges. They're going to publish prices and sizes continually in what could be a large number of instruments.”
“In this new world where you have to offer best execution and prove best execution, it's imperative that our clients be able to access this liquidity pool,” Blackburn said. “There’s no way around it. There is fragmentation of the marketplace, and workflow solutions are the only way to ‘de-fragment’ the marketplace.”
Under the partnership, Virtu’s customisable SI price feeds will be integrated to Fidessa’s smart-routing capabilities and market access so that they can be consumed as if they were additional venues sitting alongside traditional sources of liquidity. In addition, Fidessa’s order- handling capabilities enable users to better manage all their order flow across lit venues, SI operators, and the new Large in Scale dark pools.
In a press release, Christiaan Scholtes, head of EMEA markets at Virtu, said: "As a leading equities and ETP market maker, we are pleased to be working directly with one of the premier technology providers in the industry and believe that this level of collaboration is helping to build the platforms of the future and drive efficient access to competitive liquidity."
Fidessa has similar partnerships with other electronic market makers in the works, Blackburn said.