[ I N - D E P T H
|
S W I S S
looking to ‘aggress’ the order book
rather than resting liquidity on the
central limit order book, there is a
chance to match midpoint on the
way through, so there is potential
to save half the spread.
The sweep functionality may not
be unique to SwissAtMid, but the
fact that it sits on the same match-
ing engine as the lit order book is.
It means the venue looks at orders
in the same cycle, removing the
potential risk of getting ‘gamed’ on
the way through as nobody can get
ahead of your order. This feature is
also particularly attractive to those
posting liquidity because it means
fills are more likely; the more
comfortable liquidity providers are
with the venue, the tighter they
will quote.
Hanging on
“Equivalence with the EU is de-
sired by SIX as we believe that in
the long-term it is beneficial to the
Swiss financial centre, offers a fair
and level-playing field for competi-
tion and is wished for by investors
and clients/market participants,”
reads SIX Group’s official position
on equivalence.
There are several scenarios
whereby the market could see
the end of non-equivalence. The
UK’s departure from the Europe-
an Union means it will become
a third country to Europe,
so technically the UK and
Switzerland could recognise
each other, in which case
the UK-based MTFs would
likely pick up that volume
up again. Switzerland
could also sign the trade
agreement which started the
disagreement in the first place, or
the EU could move to renew the
equivalence.
“The Swiss exchange needs to
do something to hang on to that
46 // TheTrade // Winter 2019
E Q U I V A L E N C E ]
liquidity,” the London-based
buy-side trading head adds. “Our
algorithms and smart order routers
are now pre-programmed to go to
one exchange, and if we see more
exchanges in the future in light
of further developments, there is
no reason that liquidity should go
back to the other exchanges. It has
been interesting to see this play
out in the market. We measure the
transaction cost analysis on Swis-
sAtMid, and we are getting great
execution.”
Much like Brexit, it’s unclear
how this will play out, but it is
clear that there is an opportunity
for SwissAtMid and SIX Swiss
Exchange to retain the surge of
activity and volumes that it has
seen in the third quarter this year.
As SIX Swiss Exchange is now the
only game in town, so to speak, it
has seen an uptick in the use of
its services whereby traders who
may have only interacted with the
central limit order book are now
also using the dark venue.
It is, in some sense, becoming in-
creasingly unlikely that in the event
of renewed equivalence the market
would see an ‘elastic band’ effect,
with volumes returning to the
MTFs and European venues. With
the new functionality, recalibrated
algorithms and smart order rout-
ers, SIX Swiss Exchange might just
retain its spot as the third-larg-
est exchange operating in
Europe. Although, as Shaw
concludes, the group is not
leaving this to chance.
“We are not resting on our
laurels,” he says. “We know
that this isn’t a long-term
development so we are looking
to get more into the order book
and improve. There is various new
functionality that we want to roll
out next year to further increase
the attractiveness of our venue.”