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Trading venues
European trading venues have maintained their grip on STO stocks following Brexit , a report by Liquidnet has found , with three quarters of volumes taking place on venues in EMEA .
In its latest liquidity landscape report , Liquidnet found that despite European concerns that the UK might attract more flow post-Brexit through its regulatory reforms , only 2.63 % of volumes in STO stocks took place on UK-based venues at the start of this year .
Almost three quarters of volumes took place on venues based in Europe , the Middle East and Africa ( EMEA ), with the remaining 23 % taking place off-exchange or via systematic internalisers .
“ Current prospects to agree on a Memorandum of Understanding ( MOU ) between the EU and the UK on regulatory collaboration remain low ,” said Liquidnet in its report .
“ Strong concerns remain with EU regulators over the potential lack of oversight of UK trading venues should they start to attract more international and European flow . This concern has not materialised .”
In terms of venue breakdown , Liquidnet found that the post-Brexit liquidity landscape for STO stocks addressable liquidity has remained largely the same , seeing just a 2 % increase on volumes taking place on lit primary venues post-Brexit and just over a 1 % increase in volumes taking place on dark multilateral trading facilities .
Following Brexit and the loss of almost 100 % of EU share trading to the bloc , the UK has continued to try to foster new interest in its markets with dark trading at the centre of most of its reforms .
European venues maintain grip on EEA stocks post- Brexit , report finds
LATEST LIQUIDITY LANDSCAPE REPORT FROM LIQUIDNET FOUND THAT 74 % OF VOLUMES IN STO STOCKS TOOK PLACE ON EMEA-BASED VENUES IN JANUARY .
The UK Treasury and the Financial Conduct Authority ( FCA ) moved to scrap dark volume caps ( DVCs ) alongside the share trading obligation ( STO ) in April last year , while more reforms are expected to be brought in with the conclusion of the Wholesale Markets Review ( WMR ).
These are expected to be comparatively more relaxed surrounding non-lit venues compared with the European Commission ’ s changes to MiFID II , announced in November , which saw it crack down on non-transparent venues through a new blanket DVC of 7 % and sweeping changes to the quasi-dark systematic internaliser regime in a bid to push more volumes into lit markets .
Some have warned that the UK ’ s relaxed approach to dark trading could act as a hindrance to midpoint pricing , with the WMR citing that levels should remain between 11 % and 17 % in order to prevent this .
Liquidnet ’ s report found that dark trading as a proportion of on-venue trading in the UK peaked at 15.6 % in November last year , later dropping to 13.2 % in December .
“ The question is at what level does use of the RPW waiver start negatively impacting price formation with the publication of stale quotes ? Interestingly , the FCA is considering the use of non-UK prices for waivers ,” said the report .
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