Letting clients have greater control over their counterparties could be key to increasing block trades, according to Société Générale.
Speaking to theTRADEnews.com, Mark Goodman, head of quantitative electronic services (Europe) at Société Générale said a new service made available to clients late last year, called PartnerY, has helped bolster trading in size.
The service was launched in November last year as part of an initiative to help clients to trade in size, finding that for many a lack of control over who they deal with was a barrier to placing large orders.
“While talking to clients last year, one of their big concerns is they can’t find size when trading in dark pools,” explained Goodman. “When we looked into why fills were small we found that traders are very cautious because they don’t know who is on the other side, so they send smaller orders to not reveal their hand.”
Buy-siders told Société Générale that they would be more likely to trade in size if they knew which market participants they would be matched against.
PartnerY enables clients to choose which counterparties they want to deal with, enabling them to ensure they are protected from other market participants who may get a strategic advantage if a large order in a particular name is revealed.
Goodman said: “The goal of PartnerY is to give control to the end user by letting them decide which counterparties they want to trade with.
“They can select them down to an individual counterparty level and we can then provide them with data on how it has affected their trading performance to empower them to police this list on an on-going basis.”
Clients can also choose particular types of counterparties they would like to interact with if they do not wish to adopt a very granular approach to their use of PartnerY. Since the scheme has been running, Goodman said it has been well received by clients and encouraged different behavior from other dark pools, with average resting times at three hours and average ADV at 43%.
Though the launch of PartnerY predates the final agreement of MiFID II seen in January, the service may prove attractive to firms looking to trade larger orders as a result of dark pool caps set to be introduced in late 2016. While smaller dark pool trades will be capped at 4% on individual venues and 8% for Europe as a whole, dark trades that qualify for the large-in-scale waiver will be unaffected.
Other brokers are also thought to be looking to launch services that enable clients to trade blocks more easily in response to the caps on dark pool trading.