Europe’s dark multilateral trading facilities (MTFs) are engaged in fierce competition, with new entrants SIGMA X MTF, launched by Goldman Sachs last year, and UBS MTF, launched in November 2010, gaining substantial market share, while established block-focused venues have witnessed lower volumes.
Last month, UBS MTF accounted for 14.6% of Europe trading in dark MTFs, representing €4.12 billion in turnover terms. SIGMA X MTF held 11.4% (€3.24 billion), while Liquidnet had 5.9% (€1.65 billion) and NYSE Euronext's SmartPool captured just 2.5% (€700 million), according to figures provided by Thomson Reuters.
This represents a departure from the situation 12 months earlier, when Liquidnet traded €2.91 billion and SmartPool €1.93 billion. At that time, SIGMA X MTF had not yet launched, while UBS MTF traded just €151 million.
These monthly figures suggest a substantial shift of trading activity away from the established dark MTFs onto the broker-owned dark MTFs.
Part of the explanation in the growth of broker-owned dark pools may lie in the functionality offered by UBS MTF and SIGMA X MTF that allows users to send dark orders at the bid and offer, rather than just the mid-point as is the case with most other dark MTFs. Nomura has said it is in the process of rolling out bid and offer price points for its NX dark pool. NX traded €1.39 billion in February 2012, accounting for 4.9% of Europe’s dark market share. Yet one year ago, Nomura was trading €2.06 billion in its dark pool – nearly double its current activity.
Chi-X Europe's Chi Delta dark book remained Europe's biggest dark MTF accounting for the largest share of European dark MTF trading in February, €6.62 billion (23.4%), while Turquoise, the MTF owned by the London Stock Exchange, traded €2.43 billion (8.6%). BATS Europe traded €3.01 billion in the dark (10.6%).
European dark MTFs had their highest ever market share in January, reaching 3.87% of overall market activity in equities, with total turnover reaching €28.29 billion. However, that only accounts for around half of total European dark activity, with broker-operated crossing networks accounting for 51% of dark trading activity last month, according to figures provided by the six brokers that report their BCN figures to Markit BOAT. This gave a total market share of 7.65% for all European dark MTFs and crossing networks combined in February