A new dark pool launched today by CA Cheuvreux will aim to alleviate buy-side “anxiety” about high-frequency trading and offer larger trade sizes than are typically available in other venues.
The European agency broker’s BLINK MTF has received regulatory approval from the UK’s Financial Services Authority to convert from a broker crossing network into an multilateral trading facility (MTF). It will offer trading in 1,700 stocks spanning 14 of the region’s markets and will only include liquidity from the firm’s clients, thereby excluding high-frequency trading (HFT) and other proprietary flow.
“We have seen a huge amount of anxiety among buy-side firms on HFT,” Ian Peacock, global head of execution services at CA Cheuvreux told theTRADEnews.com. “But this is more to do with the buy-side knowing exactly what flow they are interacting with, rather than labelling HFT as good or bad.”
Because of its focus on institutional trading flow, Peacock said he expected order sizes to be larger than the €3,000-6,000 average execution size found on dark MTFs such as Turquoise and BATS Chi-X Europe. CA Cheuvreux’s expertise in mid- and small-cap names would also offer new and complementary liquidity opportunities for buy-side firms compared to other dark pools, Peacock said.
Fees for trading, clearing and settling trades on the platform total two basis points, although Peacock anticipates the MTF will be used primarily by existing CA Cheuvreux clients, who will be charged for using BLINK as part of their overall commissions, rather than attracting direct members.
“We expect BLINK to be used as part of our overall execution service as opposed to a venue that seeks flow from smart order routers,” he said. “The tariffs aren’t supposed to be part of a competitive proposition like other dark pools out there. It’s simply a collection of our unconflicted agency liquidity amalgamated in one place for our clients.”
Cheuvreux is the fourth broker to launch its own dark MTF, following in the footsteps of Nomura, UBS and Goldman Sachs. Many brokers have put their BCN strategies under review following strong signals from European regulators that the practice could be outlawed or at best restricted in MiFID II. Most recently, the European Parliament’s Economic and Monetary Affairs Committee, which is in the process of reviewing MiFID, proposed that the organised trading facility, a new type of venue introduced by the European Commission last year, be restricted to non-equity instruments only. If upheld, this would require BCNs to reclassify as MTFs or systematic internalisers.