THETRADETECH DAILY THE OFFICIAL NEWSPAPER OF TRADETECH 2022
to suspend the trading obligation for investment firms acting as market makers when interacting with non-EU counterparties when certain conditions are met .
The changes to the SI regime and DVCs reaffirm Europe ’ s stance on transparency and dark trading and its appetite for more volumes being transferred into the lit markets , unlike the UK which has continued to try and foster interest in alternative venues post-Brexit including scrapping DVCs all together .
This divergence raises the question as to whether trading volumes could return to the UK and potentially exclude European investors from pools of fragmented liquidity on these venues . “ There is a concern in Europe that if the UK makes it more attractive to trade on its venues , they are going to see flow go back to the UK . I think that is a big concern in Europe . The fact that they could be excluded from that pool of liquidity that could potentially gather in US , UK , and Swiss volumes means the EU could be a little left on the side ,” said Decuyper .
“ The UK is moving towards the opposite direction . They are not looking to impose any more restrictions on their SIs , they are not looking to curb dark trading , although there are also concerns that goes with that . It doesn ’ t mean that they are not monitoring the level of dark trading . Because I think at some point , we are nearing 15 % and again at what point , does that start affecting pricing ?”
In a recent panel at TradeTech , head of equities at Premier Miton , Gervais Williams , warned the audience that too much divergence could lead to the “ balkanisation of liquidity ” that could ultimately harm the markets .
“ I think that some of the market practitioners were sort of hoping , naively or otherwise that there wouldn ’ t be so much divergence so quickly , but I think now that ship has sailed and I think we ’ re definitely seeing that happen ,” added Baugh .
“ Yes , it may become more expensive to do business in Europe , but equally the implicit costs of trading may also go up in London , in relative terms maybe a lot less than in Europe . What we saw with Switzerland reintroducing competition in February was that that actually led to an increase in the implicit costs of trading for a number of different reasons .
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