NEURO Dark, a new European dark pool to be launched on 11 May by multilateral trading facility Nasdaq OMX Europe, will offer IOI functionality, smart routing and new ‘internalisation’ order types.
Users of NEURO Dark’s smart order routing functionality, which sends any orders not filled in the pool to other non-displayed venues, will also be able to interact with indications of interest (IOIs) sent to the platform by its routing partners.
“The IOIs will contain rudimentary information on stock and side, and our routing partners will only be able to send us IOIs that can be executed against,” Todd Golub, executive director of European markets development, Nasdaq OMX Europe, told theTRADEnews.com.”
Owned by global exchange group Nasdaq OMX, NEURO Dark will offer smart order routing after its initial launch to both independent dark pools and brokers’ internal crossing engines. Routing to displayed venues is not planned until further clarification of dark-lit venue interaction from regulators.
NEURO Dark will also offer an internalised order type called SELF, which is designed for market participants that do not have their own internalisation processes. This will allow users to match orders against their own internal flow within NEURO Dark, and gives them the option to match against their own flow before opening orders up to liquidity from other clients on the platform.
“With the current focus on cost-cutting, people can use a proven platform to perform the internalisation function,” said Golub. “We are planning to integrate this with the routing service in the future.”
The charge for trades completed using the SELF order type will be 0.05 basis points per side. All other executions will be charged at 0.1bps. By comparison, Chi-Delta, the dark pool offering from rival MTF Chi-X Europe due to launch in Q2, will charge 0.3bps per execution.
NEURO Dark will run independently from the Nasdaq OMX Europe and will trade around 800 of the most actively traded European blue-chip stocks. Like its lit counterpart, it will be powered by INET technology.
The platform will use the reference price pre-trade transparency waiver under MiFID to exempt it from publishing bids and offers. Under this waiver, prices in the pool are pegged to the mid-point price of a “widely published and reliable source” – typically the prices on the relevant primary exchange. Using this waiver allows NEURO Dark to accept dark orders of any size, unlike the large-in-scale waiver, which requires orders in the pool to be a specific size relative to the stock’s average daily turnover and market capitalisation.
The arrival of NEURO Dark comes at a time of heightened activity in the European dark pool market. As well as the imminent arrival of Chi-Delta, NYSE Euronext launched its SmartPool dark MTF in February, while Baikal, the London Stock Exchange’s non-displayed trading platform, will offer smart order routing from June and plans to launch a
dark order book later in the year.