ITG’s block crossing network set a trading record last month as the agency broker prepares for new regulations which limit trading volumes in dark pools from 2018.
On January 24 ITG tweeted : “ITG EMEA sets a new 1-day trading record for Posit Alert w/$940m (£750m) in value crossed.”
Posit Alert is ITG’s institutional block crossing network.
MiFID II, the new European Union regulations which come into effect in January next year, places volume caps on trading equities in a dark pool. However firms can apply for waivers which allows block trades above a specified minimum size to be exempt from the volume caps and also be exempt from pre-trade transparency requirements.
Rob Boardman, European chief executive of ITG, told Markets Media: “European equities volumes in dark pools have been rising and will become a premium after MiFID II. We have been taking preparatory steps for the dark volume caps by finding larger orders so they can trade under the large in scale waiver.”
In its fourth quarter results ITG said total average daily value traded through Posit Alert in Europe increased 60% compared to the final three months of 2015. In Europe average daily value traded in Posit was $1.1bn compared to $1.2bn in the fourth quarter of 2015, including the effects of currency translation.
“There has a been a long-term growth trend that has helped us and other platforms which has seen a lot more active managers taking positions on stocks. Posit is like eBay for matching large blocks from natural buyers and sellers,” added Boardman.
MiFID II also requires asset managers to provide more evidence that they have tried to achieve best execution across a range of asset classes, not just equities.
Boardman said: “There has been a huge demand for analytics and trading desks have become active consumers, especially for foreign exchange and fixed income.”
The MiFID II rules also require asset managers to unbundle trading commissions from investment research payments. Asset managers have to set up a research payment account which can be funded from their own revenues or from clients who have agreed a budget for research spending.
An ITG poll of more than 100 buyside professionals who participated in a webinar on the impact of MiFID II on North American asset managers found that while the majority of US asset managers do not believe MiFID II applies directly to them, 82% plan to fully unbundle all of their brokers globally.
Jack Pollina, ITG’s head of global commission management, said in a statement: “MiFID II is going to have a significant impact well beyond the shores of Europe, as institutional investors require asset managers to change the way they budget, fund, price and pay for research. North American firms are anticipating these changes and are taking steps now to adapt to the shifting expectations of their end investors.”
Boardman continued that ITG has partnered with a bank so payments for research can be put into an escrow account and not co-mingled with other money in its commission management platform.
In addition to MiFID II, ITG in Europe is also working on the firm wide strategic operating plan. Boardman said: “ITG has a global strategic plan to spend $40m on product-centric upgrades so we are hiring developers and upgrading our platforms.”
At the end of 2015 ITG sold its energy research group to private equity firm Warburg Pincus for $120.5m. In the third quarter of last year ITG said some of the proceeds will be used in a strategic operating plan over 10 quarters, including $40m of incremental investments through the end of next year in technology and people. The plan includes at least 60 new hires in client coverage teams for Alert, Algos, Triton, and portfolio trading.
Frank Troise, president and chief executive of ITG, said in the results statement: “We are pleased with the positive momentum in our business, as demonstrated by strong sequential revenue growth across all of our regions, improved profitability in our international operations and consistent market share gains in the US. We are focused on building upon this momentum through continued execution of our strategic operating plan, which is enhancing ITG’s ability to deliver best-in-class client solutions in liquidity, execution, analytics and workflow technology.”