A DV E RTOR IAL
Transforming markets, driven
by demand
The TRADETech Daily talks to Adam Matuszewski, senior product
manager at Securities & Exchanges, about how SIX has reshaped
Swiss equity trading with its non-displayed pool, SwissAtMid.
What has been the motivation to create
SwissAtMid?
SIX operates the primary and secondary
market for Swiss equities. Lit trading has
always been our core offering, however,
we saw the need to run a non-displayed
trading facility. In the years prior to the
introduction of MiFID II, the popularity of
non-displayed trading in Europe had been
soaring and this included Swiss equities.
We anticipated that the introduction of
DVCs would not diminish the demand for
dark trading, which was proved correct
when we observed that liquidity shifted
back into non-displayed pools after the first
expiry of the DVCs in September last year.
We therefore launched SwissAtMid to meet
client needs with ambition of becoming the
go-to venue for Swiss non-displayed trading.
What differentiates SwissAtMid from other
venues?
There are few key factors. From a technical
perspective, SwissAtMid and our lit book
sit on the same matching engine. That
not only guarantees accurate midpoint
prices but also allows SIX to roll-out new
order types that help clients interact with
non-displayed and lit liquidity at once.
One example is the sweep order, which
first checks the liquidity at the midpoint
and then moves to the lit in one atomic cy-
cle. Clients will not miss a potential fill on
both books and other participants cannot
get ahead of this order.
The other aspect that differentiates
SwissAtMid from other pools is the
participation of Swiss private banks. For
many of them, SwissAtMid is the preferred
non-displayed pool. Their participation
adds uniqueness to the liquidity mix which
is crucial for the whole market. Last but
not least, SwissAtMid operates under Swiss
financial law, free from any volume caps.
Which clients trade in SwissAtMid?
The lion’s share of trading activity comes
from investment banks and brokers which
accounted for approximately 70% of turn-
over in Q1 of 2019. They mostly interact with
SwissAtMid through dark seeking algos
that aim to reduce information leakage,
minimise market impact and achieve price
improvement by trading at the midpoint. The
remaining 30% is split between proprietary
trading firms and private banks. The latter
account for approximately 20% of trading
activity. Their interaction is mostly either
through Sweep orders or large resting orders.
What are the latest performance statistics
for SwissAtMid?
In Q1 2019, the average price improvement
stood at four basis points. In March alone, the
value of price improvements reached CHF
520,090, and for the whole of 2018 savings
amount to CHF 4.2 million. SwissAtMid has
enjoyed exponential growth and is the largest
liquidity pool among non-displayed and pe-
riodic auction venues in Swiss equities today.
In Q1 2019, over CHF 5.6 billion was traded,
and CHF 25 billion since launch in Q4 2016.
Its current market share of around 38% is
three times more than its nearest competitor.
Which other factors have fueled this growth?
We have seen a strong growth in block li-
quidity since January 2018. Currently, 32%
of the turnover results from orders with a
size larger than LIS thresholds. We believe
surging trade sizes are a trend across all
non-displayed pools, driven by demand
from both buy-side and sell-side clients for
non-displayed and block trading.
Furthermore, if we look at LIS executions
in single Swiss shares on other dark or pe-
riodic auction venues, we believe that block
liquidity in that share can be found in Swis-
sAtMid about 25% of the time. Further, if a
trade has been executed on other venues,
this liquidity remains in place on SwissAt-
Mid. This indicates the unique nature of
the resting orders that market participants
can interact with in SwissAtMid.
How did the Swiss stock exchange respond
to the growth of block liquidity?
Last year we introduced two new orders
that have further improved LIS liquidity –
Limit Plus and Iceberg Plus. They facilitate
block executions and can speed up time to
fill. Limit Plus is a completely unique order
that significantly increases the likelihood
that a trade gets executed, since it offers
dual exposure in both books.
With Limit Plus, participants rest orders
fully visible in our lit book but are also avail-
able for execution on SwissAtMid. Iceberg
Plus is an enhanced version of our existing
iceberg orders whereby the visible tranche is
pegged to the bid/offer while the full quanti-
ty is also available to trade in SwissAtMid.
Who benefits the most from this new order
types?
Limit Plus orders help participants to cap-
ture more volume and avoid spread cross-
ing that could harm performance against
the benchmark, because they sit at the best
price in the lit book while simultaneously
benefiting from the liquidity available at
the midpoint on SwissAtMid.
This is particularly interesting for firms
utilising VWAP (volume weighted average
price) algorithms, which seek to execute
trades at prices below the daily trading aver-
age, by following the historical volume curve,
combining spread capture and cross logic.
“We have seen a strong
growth in block liquidity
since January 2018.
Currently, 32% of the
turnover results from
orders with a size larger
than LIS thresholds.”
Issue 1
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