The TRADE 56 - Page 54

[ I N T E R V I E W | R I C H A R D emerging. At Instinet the key was about giving our clients a choice. If these new participants are going to be there and we think they could be substantial in a post-MiFID environment, then we need the data around that. We decided to go with both Virtu and Sun Trading, and there wasn’t any bias in that, it was just that those two firms were ready and able to stream liquidity. We established those partnerships prior to MiFID II so that we had a three-month advantage where we were able to look at the impact of streaming quotes from SIs. When we went to clients with this arrangement, and we held roundtables and various other events to discuss why we were doing this, we wanted to explain our rules of engagement with those types of liquidity providers; how we attract them, why we attract them and on what terms. This is all on an opt-in basis. We gained three months data and the results were favourable. When we went back to clients and shared that data with them the vast majority of clients opted-into this type of liquidity, which I thought was very interest- ing. I see that continuing to emerge this year and we will end up in a scenario where we have bucketed types of liquidity. One of our goals PA R S O N S ] mance and the client’s choice. We continue to evaluate the perfor- mance which has been good so far, and again that is interesting. The next move around that will be the size of the liquidity that those types of venues can offer. For the market making-type SIs, which may have been prevalent alongside the BCNs before, was that we were trading against those firms before in BCNs. But instead of trading against that BCN, I’m now looking at individ- ual SIs and can evaluate that firm knowing exactly who I am going to. HM: BlockMatch is in fierce competition with various other major block trading venues across Europe. Instinet recently added RFQ functions to the platform. How else has Instinet tried to distinguish BlockMatch in such a competitive market? RP: Instinet supports all of those venues, and we offer them all to our clients. We are not necessar- ily looking to compete with all of them but instead we look at it as part of our liquidity strategy. Under MiFID II we can go to all of those venues and give clients access to them, and we do. We look at it from an aggregation perspective, and so we become very agnostic as to which venue has the block “We decided to go with both Virtu and Sun Trading and there wasn’t any bias in that, it was just that those two firms were ready and able to stream liquidity.” will always be around trying to aggregate that in the best possible way. Again, this isn’t because we have a bias towards flow-type mar- ket making firms or anything like that. We’ve always been agnostic to the venue that we offer clients, it comes down to execution perfor- 54 // TheTrade // Summer 2018 as long as I can take our clients to that block. I think it’s that type of workflow solution that clients are now looking for and will continue to look for. The request-for-quote (RFQ) function on BlockMatch, the first for equities, wasn’t about com- petition against those block trading venues. It was about giving clients the option to trade in that fashion. It has been interesting so far and I think that will continue to evolve as we go through the year, but we now have buy- and sell-side firms making prices in an RFQ fashion. It is competitive. Time will tell how many of those venues will survive and how many new en- trants will come into that space. If we look at client behaviour, those block trading venues are becom- ing more important. If we link that back to broker consolidation, suddenly an awful lot of business is being executed on these venues. It’s an interesting trend showing what clients are looking for, and the block trade is an automated process, so that shift from high- touch to low-touch will be quite stark this year. High-touch traders will still have access to these types of block trading systems and platforms, but it’s a good indicator of how clients are thinking about market structure. From another client perspective, under MiFID II where you have open and fair access to all of the multilateral facilities (MTFs) clients will be looking at a point of entry to get to that liquidity, rather than have the same liquidity on multiple venues – that’s the next dilemma clients are starting to look into. But I believe there will be more scrutiny around the venues from both the buy- and sell-side. We certainly see the buy- side is much more engaged with our rules of engagement with the venues and the liquidity process. HM: In terms of MiFID II SIs and periodic auctions, and the recent debate surrounding pre-matched activity, how likely is it regulators will re-address rules around trading venues in the near future? RP: The best way to start my response here is to look at what