Dark pool growth will accelerate, particularly in Europe and Asia, in 2009, according to a global survey of investors by non-displayed equities trading venue Liquidnet.
The firm’s Buy-Side Voice report, which surveyed 590 market participants, found that despite a recent decrease in trading volumes globally, 54% of those questioned predicted an increase of dark pool usage, with only 7% estimating a decline.
Almost three-quarters (72%) of European participants questioned planned to increase their use of dark pools this year, compared to 58% in Asia and 52% in North America.
“This survey backs up our own data, showing that block trading activity looks set to remain robust, despite declining market volumes on exchange in the wake of the financial crisis,” said John Barker, managing director, Liquidnet Europe. “Dark pool trading is not a new phenomenon, but as this report shows, it is increasingly finding favour amongst institutional traders keen on reducing trading costs.”
The report also looked at the impact of MiFID in ensuring access to instant liquidity in Europe. It found that despite the introduction of a number of new trading venues, 40% of European respondents said their access to instant liquidity has decreased since the directive came into force in November 2007.
“It is noteworthy that traders in Europe feel that MiFID has had a negative impact on their ability to access instant liquidity,” added Barker. “The survey suggests that the advent of new trading venues such as MTFs means that traders are concerned about their access to trading opportunities in a more fragmented marketplace.”
Buy-side attitudes towards the sell-side were also explored. A third (33%) of respondents with less than five years of trading experience believe that the sell-side can be replaced with technology, while 67% of those with more than 30 years of trading experience did not think sell-side contact could be eliminated.