NYSE Euronext and European investment banks BNP Paribas and HSBC announced on Wednesday a partnership to create a multilateral trading facility (MTF), which will be known as Project SmartPool.
This new trading platform aims to make the execution of large orders in European-listed stocks easier.
NYSE Euronext is the first exchange to announce such an electronic block trading market in Europe. Project SmartPool will be accessible to all European sell-side firms.
As of 1 November, MiFID will eliminate the remaining concentration rules for equity trading that apply within the European Union. This creates a business opportunity for new alternative trading venues that cater to investors' varied needs. Project SmartPool is specifically designed to meet the trading needs of large institutional order flow, and will complement the limit order book already offered by NYSE Euronext in Europe, says the firm.
Unlike a traditional exchange, which provides full pre-trade transparency, Project SmartPool will enable users to interact without disclosing their identity or the size or price at which they are willing to trade.
In a release, NYSE Euronext and its partner investment firms said that all trades executed on Project SmartPool will be cleared and settled using a global solution provided by an external party, but did not disclose whom that party might be. They say more details of the MTF's market model will be revealed during its implementation.
Project SmartPool will be managed and run by NYSE Euronext, which will retain a majority share of the capital in this joint venture. The new MTF will leverage the technology used by NYSE Euronext and the existing technical infrastructure that links Euronext with its main European sell-side users.
In the United States, alternative trading platforms offering similar services – often referred to as 'dark liquidity pools' – have existed for some time and are growing rapidly.
A recent report by Aite Group estimates that block trading platforms already process 4.5% of the volume traded in the United States in Q2 2007, and TABB Group estimates that this share will grow to at least 15% in 2010. NYSE Euronext and its partners believe that the changes heralded by MiFID will trigger similar growth in Europe over time.