Agency broker Instinet Europe’s BlockMatch is to become the first dark multilateral trading facility (MTF) to use a proprietary consolidated European best bid and offer (EBBO) as its reference price, following regulatory approval.
The UK’s Financial Services Authority (FSA) and the European Securities and Markets Authority (ESMA) have allowed BlockMatch to reference its EBBO, rather than the pricing quoted on a security’s listing exchange when determining best and mid-point quotes.
Instinet expects to introduce the service in the first quarter of 2012. The firm has already invested in the high-speed systems and pan-European market data feeds required to compile its EBBO, as part of the development of its European SmartRouter, smart order routing service.
Instinet noted that primary listings venues provide “an increasingly incomplete snapshot” due to fragmentation. Twenty to 30% of trading in major European stock index components is regularly traded away from the primary national exchange.
“The lack of consolidated pricing data has been one of the most significant criticisms made of MiFID by institutional investors,” said Richard Balarkas, president and chief executive officer of Instinet Europe.
Despite plans for MiFID II to introduce a framework for harmonising market data to create a standardised consolidated post-trade date for European equities, Balarkas suggested that proprietary EBBOs were a matter of competitive differentiation between brokers. He also added that MiFID II plans to reform the rules for off-exchange European trading venues were at too early a stage for dark MTF operators to take decisions on changes to their offerings.
BlockMatch has been registered as an MTF with the FSA since 2007; the platform executed a firm record US$678 million on 4 November. It is accessible to both buy-side and sell-side institutions through Instinet’s Newport 3 EMS, Execution Experts suite of algorithms, European SmartRouter, third-party trading systems or direct FIX connection.