[ 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