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[ A D V E R T O R I A L ] The shifting liquidity landscape post-MiFID II The TRADE speaks to Mark Pumfrey, head of EMEA at Liquidnet, about the shifting liquidity landscape under MiFID II, covering the introduction of the double volume caps on dark trading, the new SI regime, the growth of periodic auctions, and what this means for liquidity. What have been the major changes under MiFID II so far? Mark Pumfrey: Not an awful lot has changed as things stand today, in that there hasn’t been any sig- nificant shift of liquidity back into the lit markets, which may well cause further regulatory scrutiny. Although, to be fair, the dark vol- ume caps (DVC) will cause further changes that aren’t 100% clear at this stage. The things that have changed have been the continued evolution of large-in-scale (LIS) trading as a percentage of the dark MTF world, which has been a rising trend for some time and up to the point the DVCs were implemented LIS was at just under one-third of dark MTF trading, up from around 5% about 18 months ago. There’s been a significant shift to take advantage of the LIS exemption, which will continue now that we have DVCs in place with LIS currently above 18 // TheTrade // Spring 2018 40% of Dark MTF trading. There’s also a shift of liquidity towards the periodic auctions; relatively small pre-DVCs, I think the number was around €40 mil- lion a day prior to the beginning of the year increasing to something like €350-400 million per day, so running into the DVCs we saw quite a big pickup on 12 March. Post the DVC implementation, we have seen this trend continuing to above €600 million, so it looks like a decent number of the below-LIS business in capped stocks is going to head towards these venues as a way of doing that business. What trends do you expect to see either continuing or emerging going forward under MiFID II? MP: I think we’ll see a continuation of the growth of LIS trading. We certainly know that institutions are keen to find large liquidity in the dark and have that size discovery process protected. LIS is the obvi- ous way to do that. The constraining factor is LIS match rates, and from our per- spective we’ve seen a significant continued increase in average daily liquidity on Liquidnet’s platform, which is up approximately 20% this year to around $28 billion of liquidity every day in European instrument types. That in itself has significantly increased our match rates which is the key; our match rates this year are in the 20-25% range, whereas two years ago they were around 16%. So, we are seeing more liquidity, and more diverse contra breadth in our pool. That’s been an important factor to grow- ing our LIS business and I guess