Aquis continues expansion plans with move into dark trading

The exchange operator confirmed earlier this week that it would be assuming responsibility for the business activities of UBS MTF for an undisclosed fee, subject to regulatory approval.

Aquis has always had its heart set on becoming an all-encompassing exchange services provider, and until recently dark trading remained an evasive final piece of the puzzle.

However, this is no longer the case. The exchange operator confirmed on 16 March that it had struck a deal with non-disclosed venue, UBS MTF, to transfer its business activities over to Aquis, subject to regulatory approval. Terms of the deal were not disclosed however it’s expected to be completed this year and to have a “marginally accretive” impact on revenue for 2022.

UBS confirmed in a statement that it was in talks with Aquis over the potential transferring of its MTF business.

Speaking to The TRADE, chief executive of Aquis, Alasdair Haynes, was coy about the costs and revenues associated with the deal in light of the exchange’s results which are due to be announced in less than two weeks.

Changing regulation

Haynes is a strong advocate of price formation on the lit markets and has been vocal in his warning of late over the potential damage to midpoint pricing should too large of a percentage of volumes take place in the dark.

In a deep dive into changing levels of dark trading in the UK and European market at the end of last year, Haynes told The TRADE that the UK market was already at the limit of what was considered dangerous to pricing.

However, in light of increasingly favourable regulation in the UK, it would be naïve for any exchange operator to give dark trading the cold shoulder. Dark books are an essential element of trading markets today and full disclosure is not always in the best interest of investors. Aquis’ change of tune should therefore come as no surprise, with seasoned market veteran Haynes able to see the inevitability of the changing market structure and he confirms freely that Aquis and UBS MTF have been in talks for some time.

“We recognise that having preached about lit trading for a very long time it’s very clear that there is a liberalisation of regulation in the UK and therefore we see that there is going to be growth in dark trading,” he said.

“We noticed over the last year that dark trading in the UK has grown substantially and we were missing out. It doesn’t mean that I’m any less positive about the lit market we operate but we can see the divergence of regulation in Europe versus the UK and with the Wholesale Markets Review (WMR) the potential for dark trading to grow.”

The UK in its WMR has opted for the more liberalised approach, confirming earlier this month that it would be scrapping double volume caps (DVCs) and allowing quasi-dark venues systematic internalisers to execute at the midpoint between the best bid and offer below Large in Scale (LiS) among other changes. Moves that will – without any doubt – increase the level of dark trading in the UK.

For Europe, not so much. Regulators on the other side of the channel have taken a distinctly opposite approach introducing a blanket DVC and restricting SIs significantly in a bid to push trade volumes back onto lit markets as a part of the Capital Markets Union (CMU) update announced in November. Whether this sees some business move over to the UK is yet to be seen but exchanges like Aquis will be waiting, nets at the ready.

“We are very uncertain as to what’s going to happen in Europe. The talk is that they’ll tighten up regulation around dark trading but if they do that we still want to be the position to offer people the service and it’ll be extraordinary good for our lit book,” he said. “We’re going to watch very closely the regulatory changes on this side of the channel and the other side. Accordingly, one is able to make bets and we now have all the chips rather than just having some.”

A person familiar with the matter confirmed that UBS’ decision to transfer its dark business should not be linked to changing MiFID regulation post-Brexit.


In today’s markets, it is essential for an exchange to offer everything from intraday and closing auctions, to lit trading and dark trading, in order to adapt to changing regulation and to compete properly. When you don’t know what you may be facing up ahead, it’s essential to ensure you have all the available tools, said Haynes.

What’s more, price formation is the lifeblood of exchanges and with such a large portion of trading now taking place in the dark, it is important for exchanges to have all the tools at their disposal to be aware of how the market is moving.

“When you don’t have one of those tools in your toolkit it makes you more vulnerable. To complete the sweep, we have to do dark trading and so we have been looking at a way in which we can establish the business,” he said. “It gives us optionality across all the products and that is really important for us to be able to offer a complete suite as to whatever the outcome is for regulation both in the UK and in Europe.”

For want of a better description, the UBS MTF was a ‘plug and play’ method of adding dark trading to Aquis’ roster. With an extensive existing offering, UBS MTF holds a cool 0.6% market share and significant revenue stream, both of which will be transferred to Aquis once the deal completes.

“It’s not easy to suddenly go in from a standing start so the opportunity for us to do this with UBS and to take the assets of their business and be able to continue to grow that is hugely beneficial,” said Haynes. “Banks would really like to have an independent dark pool and we’d like to position ourselves as a firm that can grow and be seen as that.”

He confirmed that the idea of the transfer as opposed to an acquisition was to obtain an existing dark business without any changes to users’ operations in order to provide a seamless transition. Prices and charges and clearing contracts will remain the same, other than the fact that they will be with Aquis and not UBS and the entity will be called Aquis Matching Pool.

Strategic growth

Aquis has plans to grow the UBS MTF, with potential future plans to expand into Europe depending on the state of regulation. In the year to come it also plans to target both inorganic and organic growth and Haynes confirmed it would not rule out any future additions so long as they fit in with its strategic plan.

“We have to look at a steady growth for our business to make quite certain we’re not running before we walk,” he said. “It’s not about being shy, you have to be bold when you think it’s right to put the chips on the table.”

Aquis has undergone several partnership initiatives in the last year, further interconnecting it’s growing web of business offerings as it looks to assume the role of the all-knowing exchange services operator. Earlier this year it launched a direct connection between LCH SA’s EquityClear service and its European MTF to offer users increased margining and settlement netting efficiencies in February.

More recently it announced a dual listing for the Group to trade on the Apex Segment of the Aquis Stock Exchange Growth Market last week in a bid to keep itself accountable.

“If we go and put ourselves on our own market and we’re the regulator, that’s like asking your children to mark their own homework,” said Haynes. “We want to dual list so we have benefits of our market but we actually can’t mark our own homework so therefore we have to maintain the listing on the AIM market.”