The TRADE 62 - Q4 2019 | Page 45

[ I N - D E P T H explains. “Immediately of course, we saw trading volumes move to the Swiss Exchange. Before the non-equivalence decision, we saw around 73% of flow traded on the primary versus 27% traded on the MTFs. Now, 100% of that flow is traded purely on the Swiss Exchange and it’s been a very pos- itive development for our trading desk. “For Swiss equities we do a lot of electronic trading compared to other regions. We use a mix of DMA (Direct Market Access) and algorithms, and I would say there hasn’t been a substantial change in our strategy or methodology. How- ever, venues like SwissAtMid have been a good addition to our work- flow in the dark space. If you look at our statistics in terms of exe- cution venues, we see clearly the benefits of more midpoint crossing opportunities with SwissAtMid. Most of the brokers we know have been connecting to SwissAtMid over the past few months, and the algorithm we use is seeing massive flow to the venue.” Resting block liquidity SwissAtMid, SIX Swiss Ex- change’s dark venue, has arguably been the biggest winner of the removal of Swiss equivalence. Prior to the decision, SwissAtMid held around 40% of the Swiss dark market, competing with the | S W I S S “We are back in a situation pre-MiFID I where there was only one exchange. Nobody really wanted the fragmentation that came with regulation.” LONDON-BASED BUY-SIDE HEAD OF TRADING likes of Turquoise, UBS MTF, Cboe LIS, Goldman Sachs SIGMA X MTF, ITG Posit and Instinet BlockMatch MTF. By September, SwissAtMid absorbed all the dark flow in Swiss equities that was previously traded across other dark pools. At the same time, the market saw more dark trading in the third quarter of 2019 following non-equivalence compared to the prior quarter. “It’s important here that there is actually more dark trading hap- pening now than before, meaning that the pie isn’t getting smaller,” SIX’s Shaw says. “Furthermore, we see that a significant 86% of resting liquidity in SwissAtMid is large-in-scale, providing market participants with greater ability to get that block by interacting with larger scale volume that’s coming in.” Switzerland is not subject to E Q U I V A L E N C E ] MiFID II’s double volume caps, which restrict dark trading across Europe, and there is significant block liquidity resting in the SwissAtMid dark pool. If there’s one thing traders are seeking, it is block liquidity and the ability to cross without moving the market. Due to the lack of restrictions on dark trading, rather than estab- lishing periodic auctions or large- in-scale liquidity pools as many exchanges across Europe have done to help market participants manage the requirements, SwissAtMid now encompasses all of the dark volumes, including block liquidity. There are several key features on the dark venue which could help SIX Swiss Exchange retain the increase in activity should the political climate shift and equivalence be reinstated. Swis- sAtMid has introduced new order types, including the limit plus and iceberg plus orders for dual representation in both the lit and dark order books, to help traders navigate and interact with SIX as a single venue. SwissAtMid also offers ‘sweep’ functionality, which essentially means traders can choose whether to post an order in the dark and rest there until the other side is found, or they can sweep from the dark book straight through to the lit book to find the other side. For those Issue 62 // TheTradeNews.com // 45