Euro Millennium, the pan-European dark pool for equities trading, has been asked by the UK’s financial regulator to make modifications to its functionality, according to a statement by parent company NYFIX, the US-based trading solutions vendor.
In its annual results statement, issued after trading closed in New York last night, NYFIX said that the Financial Services Authority (FSA) has “proposed an interpretation of a particular provision of MiFID that would require modifications to Euro Millennium’s current functionality”.
NYFIX said that the modifications would result in additional development costs and would need to be completed “within a timeframe acceptable to the FSA”. The firm is engaged in discussions with the regulator over the new interpretation of MiFID’s rules to minimise the impact on its European dark pool. The new FSA ruling is part of a review of MiFID’s impact on Europe’s financial markets by European regulators.
Launched in Q1 2008, Euro Millennium was the first independent dark pool in Europe and has recently seen an increase in volumes, having initially weighed on its parent’s balance sheet. According to yesterday’s results statement, NYFIX incurred an $8.0 million loss on Euro Millennium in the year to December 2008. Euro Millennium lost $2.2 million in the fourth quarter of the year, but generated $0.3 million in revenues. The dark pool set a new single-day record on 13 January 2009, with more than EUR 200 million in value matched. NYFIX said operating losses from Euro Millennium would decline during 2009, as revenues grow.
Howard Edelstein, CEO of NYFIX, said: “We believe the concentrated focus on expanding our core FIX Marketplace and Millennium offerings has positioned us well in 2009 to serve our clients’ needs for liquidity discovery and execution quality in an increasingly fragmented market.”
Prior to the FSA’s new “interpretation”, trading venues in Europe were allowed to forego MIFID’s pre-trade transparency requirements – and therefore preserve the anonymity of dark orders – in one of two ways. First, a price reference waiver was available under MiFID to dark pools that – like Euro Millennium – take their pricing from the mid-point price on the primary exchange. Dark orders were also permitted on trading venues if above minimum order sizes, based on the average daily turnover and market capitalisation of a stock, as defined by the Committee of European Securities Regulators.