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[ M A R K E T R E V I E W In comparison, Mark Pumfrey, CEO of EMEA for Liquidnet, looks at the growth of the conditional order type. He says dark venues continue to be great value for big institutions and this can be seen in the strong growth of dark trading over the last five years. “Studies have suggested that dark volume caps will limit the volume of dark trading, but the growth of LIS, which is not part of the denomi- nator, will elevate wholesale-style dark trading,” Pumfrey explains. “We expect conditional order types to grow and that will make a big difference to dark trading as you can now represent yourself con- ditionally in different LIS venues which makes trading in size easier.” Liquidnet’s platform has gone from strength to strength with its community-based model that is actively policed to ensure no ‘funny business’ ensues and orders are protected. “Dark venues require clear and strong rules of engage- ment to ensure liquidity found therein is highly actionable. Po- licing and protocol has been a big focus for us since inception. Trad- ing large size in the dark requires a significant amount of trust and confidence in the platform and I can’t stress enough the behavioural | B L O C K T R A D I N G ] aspect to this. You don’t want to share large scale trading intentions unless others treat it with the re- spect it needs,” Pumfrey adds. In what is currently considered a rather untapped market with huge potential, it’s unsurprising the last year or so has seen a burst of new entrants offering services catering to block trading. But, as with many other markets, there will be a limit to the number of venues that will survive. Grob explains over time we will likely see even more LIS trading platforms enter the space, although as Hemsley previously mentioned, those entering in 2018 with MiFID II coming into force will likely have missed the boat. “Over time you would expect to see lots of firms throw their hats into the ring so to speak, and then four or five of them slug it out over the next few years until there are maybe two that remain,” says Grob. “If block trading follows the trend of what happened with lit fragmentation, then the number of venues will continue to grow as firms look to take advantage of the opportunity, but you can expect it to fall away again.” He adds however, that using a block trading venue, like the ones mentioned here, is not the only If you see buy-side meeting buy-side, they are meeting more volume as indications of interest, and that’s why I like our model, because it provides that choice. MARK HEMSLEY, PRESIDENT, CBOE EUROPE method of sourcing blocks. A well informed and technology armed sales trader will be looking at other ways to stitch together these trades. This is of course part of the bigger picture however, and moving for- ward it looks as though block trading platforms will become increasingly important. The bottom line is com- petition is what drives innovation and if demand for such capabilities continues alongside soaring volumes of block executions, then perhaps there will be enough business to sustain more than just one or two LIS trading venues. You don’t want to share large scale trading intentions unless others treat it with the respect it needs. MARK PUMFREY, CEO, LIQUIDNET EMEA 46 TheTrade Winter 2017