THETRADETECH DA I LY
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THE OFFICIAL NEWSPAPER OF TRADETECH 2019
Equities
ELP systematic internalisers gain ground
with record volumes one year on
MARKET MAKER-OPERATED SYSTEMATIC INTERNALISERS ARE WINNING MARKET SHARE MORE THAN A YEAR INTO
THE MIFID II REGIME.
S
ystematic internalisers (SIs) operated by
market makers in Europe under MiFID II
seem to be winning over market participants
after reaching record market share in February,
according to an analysis by TABB Group.
Total daily notional among the six electronic
liquidity provider (ELP) SIs that regularly report
volumes to TABB Group reached €1.45 billion
in February this year, the highest level to date,
compared to €1.12 billion in January.
According to the data, Tower Research Capital
was the largest ELP SI in February with an
average daily notional of €372 million, followed
by Jane Street, Citadel Securities, XTX Markets,
Hudson River Trading and Virtu Financial.
“By our estimates, ELP SIs now account for
around 18% of total addressable SI volume, near-
ly 50% of all SI activity beneath the large-in-scale
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thresholds and 2.4% of total market volume,”
said Tim Cave, analyst at TABB Group and author
of the research.
SI’s were first introduced under MiFID, but
grew in popularity following the closure of
broker crossing networks (BCNs) as part of the
revised directive. TABB Group estimated that
approximately 13% of addressable equity trading
activity in Europe is now conducted through SIs,
compared to less than 1% before MiFID II was
introduced.
MiFID II also placed restrictions on dark trading
through double volume caps, which encouraged
market participants to adopt the use of SIs, and
other recently emerged venues such as periodic
auctions.
“The lion’s share of this SI activity is above the
large-in-scale (LIS) thresholds and conducted,
one would assume, by the global investment
banks. However, a growing proportion is being
conducted through SIs run by ELPs, cementing
their position as major participants in Europe’s
equity market,” Cave commented.
“Initially, it was never envisaged that electronic
market-makers would run SIs, but many were
attracted to the regime following the closure of
BCNs and because it allows them to distribute
their capital without incurring exchange fees.”
In October, The TRADE sat down with Citadel
Securities, Liontrust Asset Management and
Jefferies, to discuss how the industry has adapt-
ed to using ELP SIs since they were introduced.
In-depth evaluation and analysis of the ELP SIs
available in the market was deemed critical for
brokers and buy-side traders navigating the new
trading landscape.