[ 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
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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