Chi-X Europe, the first multilateral trading facility (MTF) to enter the European market, has announced its intention to launch a dark liquidity book from Q2 this year, subject to regulatory approval.
Chi-Delta (Dark Electronic Liquidity Trading Application) will be a separate, non-displayed referenced pegged order book that will complement the hidden orders currently available on Chi-X’s lit order book. Hidden orders on Chi-X currently comply with MiFID’s large-in-scale restrictions, which stipulate that orders must be of a minimum size to be able to waive the requirement to publish pre-trade data, thus preserving anonymity. Minimum order sizes are based on the average daily volume and market capitalisation of a stock, as defined by the Committee of European Securities Regulators (CESR).
Chi-Delta will use the price reference waiver, which allows traders to waive the publication of pre-trade data as long as prices are based on quotes found on a widely published and reliable source. In the first instance, Chi-Delta will use the primary best bid and offer as its reference price. A consolidated European best bid and offer is expected to become the source of reference prices at a later date.
Mid-peg, primary peg and market–pegged orders will be supported and orders will be matched on a continuous basis.
Trade execution costs for orders posted on Chi-Delta will be waived from launch until 31 August 2009. IOC (immediate or cancel) orders will be charged at 0.30bps for execution. Market data will continue to be disseminated free of charge via the CHIX MD feed, with dark executions flagged accordingly.
Rival MTFs Nasdaq OMX Europe and Turquoise have also announced their intentions to launch separate non-displayed trading functionality later this year
“Many of our trading participants have expressed interest in Chi-X Europe adopting a dual market structure that includes a market for speedy price discovery and a market for non-displayed crossing,” said Hirander Misra, COO of Chi-X Europe. “We developed Chi-Delta with this in mind, to help those participants wanting to execute orders whilst minimising market impact by potentially trading with a natural counterparty and limiting information leakage.”
In addition, Chi-X has increased the capacity of the core matching engine on its displayed order book to handle 225,000 messages per second, with full redundancy.