Pan-European multilateral trading facility Quote MTF is to launch a new venue in June that lets participants select counterparties based on trading behaviour.
The new hybrid market, QLX, is defined as a system that combines periodic auction functionality with continuous trading using a price-time priority and is part of a growing trend among venue operators to offer differentiated ways of sourcing dark liquidity.
Liquidity seekers initially send an order to QLX, specifying minimum size, which is then held for 20 milliseconds while a request-for-trade notification is generated – indicating stock symbol but not price or direction – and sent to passive strategy algos.
After the 20 milliseconds have elapsed, all passive order activity built up in the order book trades against the initial liquidity seeking order. The remaining portion of the order is then routed on or cancelled as per member instructions.
Quote MTF provides members with end-of-day post-trade reports that assign counterparties with a unique ID and allow liquidity seekers to monitor and assess passive fills and adjust counterparty behaviour accordingly.
By building up a community of passive liquidity providers that compete for order flow QLX will limit information leakage and encourage larger trade sizes, said Quote.
“The liquidity seeker is initiating a 20-millisecond auction which levels the playing field on latency, generates liquidity-on-demand, and because firms are reacting to only genuine order flow, QLX reduces messaging and load on technology,” commented Quote MTF CEO Tamas Madlena. “We have had highly positive feedback from market practitioners who need to address the concerns of clients who feel they are not operating on a level playing field. QLX addresses a pressing business need, as you are effectively building up a matrix of peer-to-peer relationships so you can judge the results for yourself.”
Greater variety of trading venue functionality is becoming increasingly important ahead of a potential reduction in the flexibility offered by broker crossing networks (BCNs) under MiFID II. The European Parliament – which is currently devising its version of MiFID II – has suggested that BCNs, which unlike MTFs can vet participation in their venues and control how orders are matched, should be under the same regulatory obligations as exchanges or MTFs.
Earlier this week, CA Cheuvreux announced the launch of BLINK MTF, which aims to restrict participation from high-frequency trading firms through its pricing model.
Tony Mackay, one of the founders of MTF Chi-X Europe, revealed to theTRADEnews.com last week plans for a new trading venue that uses social networking principles to allow buy- and sell-side firms to trade blocks choosing preferred counterparties and terms of trade.
Quote MTF is a Hungarian-regulated platform that launched in April 2011. According to figures from Thomson Reuters, it traded €955.04 million in March, giving it a pan-European market share of 0.12%.