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UPDATE TK Senior buy-siders agree periodic auctions require regulatory tightening for addressable liquidity Heads of trading at asset management firms express concerns around addressable liquidity on periodic auctions. S enior buy-siders have agreed that regulators should consider tightening the rules around periodic auc- tions to improve transparency and reduce broker-pref- erencing. A poll of heads of trading and dealing at asset man- agement firms across Liquidnet’s member network found that almost 70% generally support periodic auc- tions following the introduction of the double volume caps (DVCs) for dark trading in March. However, half of respondents recognised the need for further regulatory tightening of periodic auctions, particularly around transparency and broker-prefer- encing, as it can be difficult to distinguish between addressable and non-addressable liquidity. Regulators have also expressed similar concerns and have said that in some ways the venue type is circumnavigating the rules under MiFID II. “We don’t use periodics at the moment as it is diffi- cult to identify what is attainable liquidity,” said one senior buy-sider, while another added that “without knowing the level of addressable liquidity, any price transparency is meaningless”. Periodic auctions have seen a surge in volumes since the inception of MiFID II on 3 January. 6 // TheTrade // Summer 2018 Exchange operator Cboe saw its European Periodic Auction book set a new one-day record of €1.08 billion notional value traded. The new record on 24 April sur- passed the previous one-day record of €969.2 million set on 27 March this year. The use of periodic auctions was widely debated at this year’s TradeTech Europe conference in Paris. Major exchange operators including the London Stock Exchange Group and Cboe Europe, claimed pre- matched activity on auctions has been overstated. Speaking on a keynote discussion panel Tom Sten- house, head of product for equities at the London Stock Exchange Group, claimed that around 25% of the exchange’s periodic auction volumes are self-matching, and just 10% of that proportion comes through at auction time while the remaining 90% are resting orders. “We don’t use periodic auctions at the moment as it is difficult to identify what is attainable liquidity.” - ANONYMOUS SENIOR BUY-SIDER