New tools contribute to dark trading rise in Europe

Dark trading in Europe continued to grow in the first quarter of 2010, with Credit Suisse among a number of dark pool operators reporting a significant volume increase.
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Dark trading in Europe continued to grow in the first quarter of 2010, with Credit Suisse among a number of dark pool operators reporting a significant volume increase.

Crossfinder, Credit Suisse’s internal crossing network, executed equities trades worth just over €16.3 billion during Q1 2010, a 64% increase on the €9.9 billion traded in Q4 2009. This means Crossfinder traded an average of €258.3 million per day over the last quarter.

Credit Suisse’s figures are single counted and only include liquidity with which clients could have interacted. It does not include large trades the bank conducts with itself using Crossfinder or executions resulting from orders routed to other dark pools.

Citigroup’s crossing engine, Citi Match, also reported a rise in value traded to $16.6 billion (€12.38 billion), from $16.2 billion ($12.08 billion) in Q4 2009.

“Our clients had a relatively quiet February, but volume picked up dramatically in March, which was our second busiest month since we launched,” said Jack Vensel, managing director and head of electronic trading, EMEA, Citi, in a statement.

Chi-Delta, Europe’s largest non-displayed multilateral trading facility (MTF), operated by Chi-X Europe, traded €11.9 billion during Q1 2010, up from €8.1 billion in the previous three months, while BATS Europe’s dark pool traded €7.1 billion between January and March, compared with €5.15 billion in Q4 2009, according to Thomson Reuters Equity Market Share Reporter for Europe.

Japanese investment bank Nomura’s NX dark pool traded €3.22 billion in the first quarter of the year. NX was reclassified from an internal crossing engine to an MTF for commercial reasons in January 2010.

Non-displayed MTFs enjoyed a record month in terms of turnover in March, according to Thomson Reuters. Dark MTFs traded €14.5 billion last month, compared with €13.3 billion in February. The proportion of dark MTF trading in terms of overall value traded in Europe also rose to 1.83% in March from 1.73% in February.

According to Simmy Grewal, analyst at Aite Group, the continuing rise in dark trading in Europe is largely due to the increasing sophistication of tools available to navigate non-displayed markets.

“Dark liquidity in Europe is extremely fragmented, but there are now more aggregation tools and services that allow traders to link all this liquidity together,” Grewal told “Better tools, combined with the increased transparency provided by Credit Suisse and Citi, have made traders more comfortable with dark trading.”

Deutsche Bank, released Super X, a dark liquidity seeking algorithm in March, which ranks dark pools’ performance in real time relative to the order attributes and urgency level specified by the client, then routes orders accordingly. According to The TRADE’s 2010 Algorithmic Trading Survey, the use of dark liquidity seeking algorithms has shot up over the last year, with 82% of respondents using them, compared to 51% the previous year.

Citi Match is currently classified as an over-the-counter trading venue, while Crossfinder is registered under MiFID as a systematic internaliser, meaning neither is required to provide any historical data. All over-the-counter venues and systematic internalisers currently report post-trade to reporting venues such as BOAT, but it is not possible to separate out trades conducted in an automated crossing engine from those handled manually on OTC desks.