UPDATE
REGULATION
Dark pool trading halved, LIS activity stagnant as
MiFID II double volume caps take effect
Thomson Reuters data shows early effect of MiFID II DVCs as dark pool trading
plummets, periodic auctions surge but LIS activity declines.
T
rading in dark pools halved and large-in-scale (LIS)
activity dropped slightly across Europe during the
first week of MiFID II’s double volume caps (DVCs),
according to data from Thomson Reuters.
The Thomson Reuters March Share Reporter ana-
lysed activity between 12 March, the day MiFID II’s
DVCs were implemented, and 16 March with a clear
indication that volumes in dark pools are declining.
Trading in dark pools halved to 3.06% market share of
on-book trading from 6.15%, while LIS trading fell slight-
ly to 1.25% market share of on-book trading from 1.43%.
LIS and block trading venues were widely expected
to benefit from significant growth once the DVCs were
introduced across Europe, which limit the ability to
trade in dark pools. In comparison, however, periodic
auctions have doubled their share of on-book trading
from 0.64% to 1.23% during the same time frame.
Periodic auctions have proved to be a popular venue
amongst traders looking to avoid the DVCs with pro-
viders like Cboe Global Markets seeing record activity
on the day the caps were introduced.In mid-March
UBS confirmed it is planning to launch its own peri-
6 // TheTrade // Spring 2018
“Trading in dark pools halved to
3.06% market share of on-book
trading from 6.15%.”
odic auction service in a bid to help its clients trade
stocks that have been suspended by the DVCs.
One of the fundamental objectives of MiFID II,
which came into force on 3 January, was to shift trad-
ing on dark venues towards on-exchange or lit order
books for greater transparency, but early statistics
suggest traders are favouring alternative venues such
as periodic auctions.“The double volume caps for dark
pool trading is designed to increase transparency and
move transactions onto lit markets. With the caps
only in effect for just over a week, the early signs are
that liquidity has moved to periodic auctions,” said
John Mason, head of regulatory and market structure
strategic response at Thomson Reuters.
“If the result of the trading caps is to shift trading out
of dark pools into periodic auctions, then the regula-
tor has not really achieved what it was trying to. It is