Greater community engagement and enhancement of services attractive to the buy-side, such as block trading, will be the key to building on Turquoise’s recent record highs, CEO Robert Barnes told theTRADEnews.com.
The London Stock Exchange-owned multilateral trading facility (MTF) has seen record trading days in recent months and grown its share of European equity trading to new highs.
Since January 2013, average daily value traded has increased by 135% up to April 2014 and now stands at €4.26 billion. Turquoise saw a record day on 8 April of €5.4 billion, around 11% of all European equity trading.
Barnes, who left his role as CEO of UBS MTF to head up Turquoise in August 2013, said promoting unique Turquoise features that appeal to institutional investors has been a fundamental part of his growth strategy for the trading platform.
“Turquoise implemented size priority in its midpoint order book in summer 2012 for both continuous midpoint and randomised uncross functionalities. In September 2013 we took the decision to brand Turquoise Uncross and raise the profile of this feature following positive feedback from customers,” he explained.
“Randomly uncrossing passive orders resting over meaningful time windows makes latency arbitrage strategies uneconomic. The natural flow resting in Turquoise Uncross is attractive to the buy-side.”
The uncross system will randomly cross orders over a 5-10 second period throughout the day. Orders are placed in a five-second window, and then during the following five seconds are crossed at a random point, which then begins a new five-second order placement window.
A key element of Barnes’ approach has been to heighten Turquoise’s pan-European profile. “We’ve been actively engaging with our user community, particularly in continental Europe. In the last few months we’ve run customer roadshows in France which have been very encouraging,” he said.
Noting buy-side concerns about the cost of technology and connectivity, Barnes hopes the ability to access a pan-European stock universe without bearing the burden of having multiple connections and IT systems will become increasingly important for firms as they continue to look for cost savings.
“Participants are concerned about costs,” Barnes said. “We use Release 8 of Millennium IT which means dealers have efficiency of similar APIs on all London Stock Exchange Group platforms. The ability to use a single Turquoise connection to trade across 18 different countries, including the Czech Republic and Hungary, also helps to cut the cost of trading.”
Barnes says further innovation will be central to continuing Turquoise’s growth. Increasing the average size of trades, which institutional investors are increasingly looking for, will be a priority for the MTF in the coming months.
“The introduction of Block Discovery is another project. We have regulatory approval, technology is available and we’re engaging with the sell- and buy-side to identify how best to integrate this into their workflow,” added Barnes.
Block Discovery will enable traders to send parent orders without locking them in until a block match is found, meaning smaller orders can be sent out to dark pools and be recalled if necessary.
“We won’t be putting the service live until the community is comfortable, but so far we’ve had some very positive engagement and buy-side dealers like what we’re proposing.”