A DV E RTO R IAL
Taking stock: a review of the
equities trading landscape
Scott Bradley, head of sales and marketing, London Stock Exchange, Cash
Secondary Markets and Turquoise, London Stock Exchange Group reviews
the current state of the equities trading landscape post-MiFID II.
S
ome 15 months on from the implemen-
tation date and go-live for the new
MiFID II environment and a year on from
the introduction of the first set of double
volume caps (DVCs), the question remains
where are we now?
There’s been much debate around whether
the overall liquidity landscape has changed
for the better since MiFID II’s implemen-
tation, or if it has become more challenging
to navigate. Following the removal of the
Broker Crossing Network (BCN) construct
and with dark MTF trading activity in Eu-
rope decreasing significantly since January
2018, focus and attention of resource has
been directed at understanding how best to
source liquidity opportunities to get business
done. A workflow shift in routing more
orders towards Large in Scale (LIS) venues
has resulted in the proportion of dark activity
which can be considered “blocks” as defined
by the ESMA to increase to over 30%.
A systematic change?
The much-anticipated Systematic Internal-
iser (SI) regime, whilst originally a product
of MiFID, came into play more meaningfully
for equities under MiFID II and continues to
command much attention as electronic mar-
ket makers develop and refine their bi-later-
al, transparent liquidity provision. In Q1 2019,
traded volume by the largest six electronic
liquidity providers reached just over €1.5bn
per day, according to a Rosenblatt report.
Taking into account addressable SI liquidity
only, this can be considered in the region
of 10% of total SI volumes, with broker risk
activity accounting for the difference.
As addressable SI volumes have increased,
there has been a corresponding decrease in
lit MTF activity, alongside a drop in dark
MTF trading volumes (due to the DVCs
coming into force). Some of this activity
has found its way onto the Periodic Auction
platforms (of which there are now seven
Fig 1: Low Reversion
Big XYT independent analysis, February 2019
Turquoise Plato Lit Auctions TM as high quality execution destination
% Broker Neutral MTF periodic auction trades where primary BBO
midpoint reference has changed following execution
70%
60%
50%
Turquoise Plato™
40%
Turquoise Plato Lit Auctions™
Cboe Europe - BXE Periodic
30%
Cboe Europe - BXE Dark Order Book
Lower is better
Cboe Europe - CXE Dark Order Book
20%
Turquoise Plato Lit Auctions™
10%
0%
+0ms
+50ms
+200ms
+500ms
+1000ms
+5000ms
Time from trade
Source: Big XYT, March 2019
10
THETRADETECH DAILY
“Sitting right at the core
of the cash equities
trading ecosystem,
understanding the
evolving needs of clients
and partnering through
innovation remain
fundamental to our
liquidity proposition
strategy.”
operating in Europe, including Turquoise
Plato Lit Auctions). These new platforms
now account for approximately €1bn of
daily EU trading activity. These channels
have evidently become a standard feature
in brokers’ smart routing logics, in part due
to the ability to trade in all order sizes with
low market reversion outcomes (Fig 1). This
is the same high quality of execution we
have become used to seeing when trading
in electronic Conditional Block venues like
Turquoise Plato Block Discovery.
Lit exchange volumes in general have seen
liquidity changes too, as some key member
participants are actively involved in build-
ing out their bi-lateral liquidity provision
capabilities through the SI regime. This
is particularly the case during continuous
trading periods where it has been estimated
that EU lit exchange activity has dropped to
just over 31% of overall volume versus 40%
at the time of MiFID II go-live. Importantly,
however, there has been a corresponding
significant increase in auction activity over
the same period. With overall EU trad-