Barclays Capital, the investment banking division of Barclays Bank, will launch its LX dark pool in Europe in Q3 2010, and aims to differentiate the service by enabling clients to choose the type of flow they interact with and receive detailed reports on execution performance.
Barclays already operates the LX dark pool in the US, which is derived from the platform acquired with other assets of the collapsed US investment bank Lehman Brothers in Q4 2008.
“One of the core value propositions that we were very specific about when we built the dark liquidity pool in the US was to provide a unique and differentiated pool of liquidity for our clients to interact with while giving them transparency around performance of the interaction,” Brian Fagen, head of equities electronic trading distribution, BarCap, said in an interview for the Q2 2010 issue of The TRADE. “[Clients] want specifics about their performance and the toxicity of the flow they’re executing against, and have the flexibility to determine what parts of the flow they interact with based upon this information.”
According to Damien Bunce, head of equities electronic sales and trading, Europe, Barclays Capital, LX could have gone live in Europe earlier, but the firm held off on launching the product to see how the regulatory landscape would develop.
“We could have gone to market sooner, but the regulatory outlook has been evolving over the last six months with our competitors launching multilateral trading facility (MTF) offerings,” said Bunce. “We were anxious to see the dust settle to ensure that the services we offer are launched with foresight and in line with the regulatory regime.”
Exchanges have argued that broker dark pools offer essentially the same kind of crossing service as regulated markets and MTFs and should be regulated as such, while brokers counter that their crossing networks are just another part of the tools used to provide best execution to clients. Nomura and UBS have announced plans to launch separate non-displayed MTFs from their internal crossing platforms, while six brokers – Citi, Credit Suisse, Deutsche Bank, J.P. Morgan Cazenove, Morgan Stanley and UBS – have started to provide more transparency on their dark pools by reporting aggregate country-specific data to trade reporting facility Markit at the end of May.
The Committee of European Securities Regulators, the body charged with ensuring supervisory convergence among the region’s securities regulators, hinted in a recent consultation paper on equity markets that tighter rules governing broker dark pools could be put in place as part of the European Commission’s upcoming review of MiFID.
A full interview with the BarCap equities electronic trading team will be published in the Q2 issue of The TRADE in the coming weeks.