ITG: Introduction of DVC has seen an emergence of different venue profiles
15 May 2018 London
Image: Shutterstock
Dark caps created “a more fragmented, and likely more challenging, liquidity landscape for capped securities compared with non-capped ones”, according to an April report by ITG, a financial technology firm.
The research showed that since the Markets in Financial Instruments Directive (MIFID II) went live on 3 January, and since the later introduction by The European European Securities and Markets Authority of double volume caps (DVC), there has been an “emergence of notably different venue profiles for DVC and non-DVC stocks”.
ITG found that across the overall equities marketplace in Europe, trading on dark venues (as percent of total market volume) has started to decrease while lit venues recaptured the bulk of the trading volume thus far in 2018, with a 90 percent increase.
The research by ITG found that talk since MiFID II’s 3 January go-live date might have shifted in focus but by no means has decreased.
ITG said: “The changing market structure dynamics in Europe continue to be in the front of our clients minds, in Europe and globally. With a full quarter of trading activity since MiFID II took effect, we are providing an update on the significant changes in
equities markets.”
“This data set provides an exclusive view into how firms are adapting their execution venue choices as a result of the new regulation, including the impact of double volume caps (DVCs) for activity after 12 March.”
ITG concluded: “We found that use of both bank-sponsored and systematic internalisers has increased so far in 2018, while broker crossing network flow disappeared.”
“All of this confirms our expectations of how MiFID II would affect the overall market structure in Europe. We believe these trends will strengthen through the rest of 2018 as algorithmic trading
providers optimise use of the new and existing venue types.”
The research showed that since the Markets in Financial Instruments Directive (MIFID II) went live on 3 January, and since the later introduction by The European European Securities and Markets Authority of double volume caps (DVC), there has been an “emergence of notably different venue profiles for DVC and non-DVC stocks”.
ITG found that across the overall equities marketplace in Europe, trading on dark venues (as percent of total market volume) has started to decrease while lit venues recaptured the bulk of the trading volume thus far in 2018, with a 90 percent increase.
The research by ITG found that talk since MiFID II’s 3 January go-live date might have shifted in focus but by no means has decreased.
ITG said: “The changing market structure dynamics in Europe continue to be in the front of our clients minds, in Europe and globally. With a full quarter of trading activity since MiFID II took effect, we are providing an update on the significant changes in
equities markets.”
“This data set provides an exclusive view into how firms are adapting their execution venue choices as a result of the new regulation, including the impact of double volume caps (DVCs) for activity after 12 March.”
ITG concluded: “We found that use of both bank-sponsored and systematic internalisers has increased so far in 2018, while broker crossing network flow disappeared.”
“All of this confirms our expectations of how MiFID II would affect the overall market structure in Europe. We believe these trends will strengthen through the rest of 2018 as algorithmic trading
providers optimise use of the new and existing venue types.”
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