Euro Millennium, the European dark pool operated by US technology vendor NYFIX, has confirmed it will change its trade matching algorithm following discussions with UK regulator the Financial Services Authority (FSA).
From 14 April, Euro Millennium will adjust the way its matches orders to only execute orders at the mid-point of the underlying reference market it uses, instead of trading at or within the best bid and offer price. Testing with the new functionality commenced today.
As a result, SWX Swiss Block, a dark pool offering from SWX Swiss Exchange that is ‘powered’ by Euro Millennium, will also implement the change on 14 April.
NYFIX launched Euro Millennium in Q1 2008 and announced in its end-of-year results in February 2009 that the FSA had asked it to modify the pool’s functionality.
“We have been in discussions with the FSA for around eight months as they seek to devise a narrower interpretation of pre-trade data transparency waivers,” Chris Smith, CEO, Euro Millennium, told theTRADEnews.com. “To avoid further distraction, we have agreed to implement an initial change to the Euro Millennium matching algorithm to make it consistent with FSA’s understanding of the pre-trade transparency waiver.
As an interim measure we will introduce mid point matching next week. We will also introduce additional matching tools and reference points over the coming months.”
These will include bid and offer matching points and, potentially, a close matching point, which could see the introduction of a matching period after the reference market closing auction.
Following the changes to its functionality, Euro Millennium will continue to operate under the same pre-trade transparency waiver, which allows trading venues to forego the publication of bid and offer quotes as long as orders are matched within the spread on a “widely published and reliable price source”. Smith said he expects the regulatory framework for use of pre-trade data waivers by dark pool operators to continue to evolve.
In addition, Euro Millennium announced plans to add to its universe of stocks. It has made Italian, Finnish, Danish and Swedish stocks, including mid- and small-cap stocks, available for testing. A firm launch date for the rollout of these stocks is expected soon.