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emerging. At Instinet the key was
about giving our clients a choice. If
these new participants are going to
be there and we think they could
be substantial in a post-MiFID
environment, then we need the
data around that. We decided to go
with both Virtu and Sun Trading,
and there wasn’t any bias in that, it
was just that those two firms were
ready and able to stream liquidity.
We established those partnerships
prior to MiFID II so that we had a
three-month advantage where we
were able to look at the impact of
streaming quotes from SIs.
When we went to clients with
this arrangement, and we held
roundtables and various other
events to discuss why we were
doing this, we wanted to explain
our rules of engagement with those
types of liquidity providers; how
we attract them, why we attract
them and on what terms. This is all
on an opt-in basis. We gained three
months data and the results were
favourable. When we went back to
clients and shared that data with
them the vast majority of clients
opted-into this type of liquidity,
which I thought was very interest-
ing. I see that continuing to emerge
this year and we will end up in a
scenario where we have bucketed
types of liquidity. One of our goals
PA R S O N S ]
mance and the client’s choice. We
continue to evaluate the perfor-
mance which has been good so far,
and again that is interesting. The
next move around that will be the
size of the liquidity that those types
of venues can offer. For the market
making-type SIs, which may have
been prevalent alongside the BCNs
before, was that we were trading
against those firms before in BCNs.
But instead of trading against that
BCN, I’m now looking at individ-
ual SIs and can evaluate that firm
knowing exactly who I am going to.
HM: BlockMatch is in fierce
competition with various other
major block trading venues across
Europe. Instinet recently added RFQ
functions to the platform. How else
has Instinet tried to distinguish
BlockMatch in such a competitive
market?
RP: Instinet supports all of those
venues, and we offer them all to
our clients. We are not necessar-
ily looking to compete with all of
them but instead we look at it as
part of our liquidity strategy. Under
MiFID II we can go to all of those
venues and give clients access to
them, and we do. We look at it
from an aggregation perspective,
and so we become very agnostic
as to which venue has the block
“We decided to go with both Virtu and Sun
Trading and there wasn’t any bias in that, it was
just that those two firms were ready and able to
stream liquidity.”
will always be around trying to
aggregate that in the best possible
way. Again, this isn’t because we
have a bias towards flow-type mar-
ket making firms or anything like
that. We’ve always been agnostic
to the venue that we offer clients, it
comes down to execution perfor-
54 // TheTrade // Summer 2018
as long as I can take our clients to
that block. I think it’s that type of
workflow solution that clients are
now looking for and will continue
to look for. The request-for-quote
(RFQ) function on BlockMatch, the
first for equities, wasn’t about com-
petition against those block trading
venues. It was about giving clients
the option to trade in that fashion.
It has been interesting so far and I
think that will continue to evolve
as we go through the year, but we
now have buy- and sell-side firms
making prices in an RFQ fashion.
It is competitive. Time will tell
how many of those venues will
survive and how many new en-
trants will come into that space. If
we look at client behaviour, those
block trading venues are becom-
ing more important. If we link
that back to broker consolidation,
suddenly an awful lot of business
is being executed on these venues.
It’s an interesting trend showing
what clients are looking for, and
the block trade is an automated
process, so that shift from high-
touch to low-touch will be quite
stark this year. High-touch traders
will still have access to these
types of block trading systems and
platforms, but it’s a good indicator
of how clients are thinking about
market structure. From another
client perspective, under MiFID
II where you have open and fair
access to all of the multilateral
facilities (MTFs) clients will be
looking at a point of entry to get to
that liquidity, rather than have the
same liquidity on multiple venues –
that’s the next dilemma clients are
starting to look into. But I believe
there will be more scrutiny around
the venues from both the buy- and
sell-side. We certainly see the buy-
side is much more engaged with
our rules of engagement with the
venues and the liquidity process.
HM: In terms of MiFID II SIs and
periodic auctions, and the recent
debate surrounding pre-matched
activity, how likely is it regulators
will re-address rules around trading
venues in the near future?
RP: The best way to start my
response here is to look at what