Since 20 October 2014 launch of the original Turquoise Block Discovery service to the end of November 2017, investors successfully matched €58 billion via Turquoise Plato Block Discovery™ of which €54 billion or more than 92.5% matched since the September 2016 cooperation agreement with Plato. How do you think MiFID II will impact block-trading volumes in Europe?
It’s clear from the MiFID II rules that regulators believe dark pools should mainly be used to trade larger orders. Although many disagree with this notion and believe that the double-volume caps for smaller dark trades are a sub-optimal regulatory response, the new rules have encouraged innovation among trading venue operators. As a result, block trading is already on the increase and now represents 10% of total dark trading today, according to Rosenblatt’s estimates. We would not be surprised to see this double over the next year, as market participants become more comfortable with the new trading landscape and see the potential benefits of resting large, passive orders on block venues.
What role can/should academics play in the development of market structure?
The increased fragmentation and automation of equity markets over the last 20 years has resulted in an explosion of market data, which gives academics more opportunities than ever to evaluate modern-day market structure. While it is important that academics have access to meaningful trading data, they also need access to practitioners to help them properly assess market dynamics and offer empirical evidence on the state of European market structure. Plato can play an important role in helping to foster engagement between academics and market participants by bringing these two communities together and encouraging research on current issues facing European markets.
What are your main market structure concerns as we finally move into MiFID II?
One of the most controversial issues stemming from MiFID II is the systematic internaliser regime for equities. We’ve been looking closely at both the regulatory and operational aspects of the SI and it’s clear that some aspects remain poorly understood. We think the market would benefit from more transparency from SI operators so that traders and investors fully understand the benefits and risks associated with these new types of execution venues. Without adequate transparency, there is a risk that regulators will take drastic action and limit or even ban SI trading.