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s a market estimated to be
worth €100 billion by the
end of 2018, large in scale
(LIS) trading on major European
dark pools has fast become a highly
competitive business. The last
couple of years have seen tradi-
tional venues from firms like ITG,
Instinet and Liquidnet - along-
side recently established block
trading venues like Cboe LIS and
Turquoise Plato - battle to win
market share and liquidity. The
other venue that has come a bit late
to the party is Euronext, having
announced plans to launch its
own LIS venue as other exchanges
ponder entering the space. The
block trading landscape looks very
different from a year ago.
Despite dark caps having not yet
been applied, statistics from Fi-
dessa show the proportion of dark
traded as LIS blocks has close to
doubled from approximately 12%
earlier this year, to almost 22.5% as
of November this year.
“There is definitely a bigger
emphasis on block trading venues,”
says Mark Hemsley, president of
Cboe Europe. “We really started
in the space this year and it has
been interesting to see the rise in
volumes from nothing to record
figures we reported recently. There
have been many exchanges coming
out and saying they will offer a
block offering too, but the reality is
they have left it too late to be a real
player in the first year of MiFID II.”
Robert Barnes, CEO of Turquoise
which offers its own Turquoise
Plato Block Discovery platform,
paints a similar picture of changes
seen across the LIS landscape. “Be-
haviour is evolving in order to em-
brace the new regulatory landscape
by trading blocks that are above
LIS. As this ecosystem evolves, we
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TheTrade
Winter 2017
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B L O C K
T R A D I N G ]
expect the demand for electronic
block trading to continue to grow,”
he says.
Challenging the incumbents
So what was once a question of
whether LIS activity will increase
in 2018 has shifted to which venue
will win the most market share,
which offers the better block
trading service and will all of these
side support with board members
consisting of mainly buy-siders,”
Grob says. “Cboe LIS has the
technology which is already a huge
success in the US, meaning large
US firms could opt for this venue
because it is familiar to them. As
for Liquidnet, they are considered
the original block trading venue;
they have been doing it for years
and they are good at it. Ultimately,
Ultimately, it will come down to the buy-side
because that’s where blocks originate, so you
could make the case for any of these venues.
STEVE GROB, DIRECTOR OF GROUP STRATEGY, FIDESSA
venues survive long-term. It’s clear
they are all trying to solve a prob-
lem presented by MiFID II and
the introduction of double volume
caps, but interestingly the plat-
forms all operate very differently
and attempt to solve the problem
in slightly different ways.
Liquidnet is considered the
incumbent by many market par-
ticipants and possibly the most
well-known of the block trading
venues. It acts as a broker provid-
ing a buy-side crossing network by
embedding technology into buy-
side order management systems.
This is very different to Turquoise
Plato where the buy-side instructs
a broker to send an order onto the
venue, while ITG offers a periodic
auction style venue. Steve Grob,
director of group strategy at Fides-
sa, explains the buy-side will play
a key role in deciding which of the
block trading venues will come out
on top, but they are all very much
in the running.
“Turquoise Plato has that buy-
it will come down to the buy-side
because that’s where blocks orig-
inate, so you could make the case
for any of these venues.”
The Cboe LIS platform saw
record growth just 10 months after
its launch, with more than 100 buy-
side firms on-boarded and over €10
billion executed. The development
of Cboe LIS - one of the younger
block trading platforms - was in
some ways based on improving the
more traditional venue models,
some of which have encountered
criticism on how they operate from
competitors. In terms of which
venue will win the most market
share and liquidity, Hemsley ex-
plains it will very much depend on
the model.
Risk of price movement
“ITG and Liquidnet opted for the
single dealer approach, compet-
ing with the rest of the sell-side
to put together those trades,” he
says. “The other end of the scale
is Turquoise Plato where they