LSE Group block trading initiatives ahead of MiFID II countdown

London Stock Exchange plc’s new block trading, auction and hidden order innovations including the Intraday Auction and Hidden Midpoint Pegged Orders recorded significant growth in 2016. Turquoise Plato Block Discovery also demonstrated very strong growth throughout the year. The trend highlights investor demand for trading services that will allow adaptation ahead of MiFID II’s impending limits on pre-trade transparency waivers, expected to significantly alter the use of dark pool and off-order book trading.

The rise in demand is timely as from 3 January 2017, ESMA will measure daily dark pool and off-order book trading levels to determine which stocks will be affected by caps on trading in dark pools or off-order book for six months from January 2018.

Research from London Stock Exchange estimates that should current trading patterns persist in 2017, every stock in the FTSE 100 would be prevented from trading in dark pool venues or off-order book, prompting the innovation of these new trading services to facilitate Large-in-Scale or block trading.

Key statistics

Turquoise Plato Block Discovery:

  • €8.5 billion traded since launch in Oct-2014 of which more than half since Sept-2016 Average trade size = €312,099
  • Record largest trade: €13.1m, Dec-2016 in Italian company Eni
  • Record month by value traded: €1548m, Nov-2016, +1,100% versus Nov-2015
  • Record month by number of trades: 4959, Nov-2016, +955% versus Nov-2015

London Stock Exchange Intraday Auction:

  • Record weekly value traded is £55.9m in the w/c 3rd October – 109% more than the value traded in the launch week for intraday auctions
  • Average Daily Value traded in intraday auctions is £4.8m
  • The record uncross in a single security is £8.9m in GSK
  • 1 out of every 10 uncrosses in FTSE Small Cap and AIM securities accounts for more than 5% of the daily turnover in that security
  • Settlement of new Weekly FTSE 100 options references intraday auction uncrossing price

Hidden Midpoint Pegged Orders:

  • Average Daily Value traded in December is £4.3m, 4x larger than at launch in October 2015
  • November 2016 was a record month with a total value traded of £81.7m
  • Largest day by value traded is 10th November – £23.1m
  • Largest individual trade was £2.2m in SAB Miller on 4th October (~500% LIS)
  • The average order size is £403,000

Brian Schwieger, LSE

Brian Schwieger, Global Head of Equities Products, London Stock Exchange said:

2017 will be the year that the industry moves into top gear preparing for MiFID II and we expect even greater focus given to the problem of working through the double volume caps. We have worked with our customers to launch and develop a suite of innovative new trading services whose adoption is already playing a significant role in the evolution of equities trading that we expect will gather momentum next year.

Read Also: