SmartPool, the pan-European non-displayed trading venue operated by exchange group NYSE Euronext, has started integrating the dark trading assets acquired as part of its parent’s takeover of trading technology firm NYFIX, as it bids to make its mark in the dark pool arena.
As well as migrating core customers from NYFIX’s Euro Millennium pan-European dark pool, SmartPool will also replace NYFIX as the partner of SIX Swiss Exchange for Swiss Block, a dark pool for Swiss blue-chip equities.
“We are now focused on long-term growth including expanding our stock list, targeting more customers from continental Europe and adjusting our market model,” Lee Hodgkinson, CEO, SmartPool, told theTRADEnews.com.
SmartPool’s expanded role in Europe’s dark trading market come as Chi-Delta, the dark pool owned by multilateral trading facility (MTF) Chi-X Europe, claimed the biggest share of non-displayed trading in Europe, according to figures from data vendor Thomson Reuters. In November, Chi-Delta accounted for 27.28% of all reported dark pool liquidity, compared with 1.61% for SmartPool. SWX Swiss Block accounted for 0.28%, while Euro Millennium chalked up a 3.81% market share in its last month of operation. Broker-owned dark pools and crossing networks do not publish monthly volume statistics.
NYSE Euronext’s technology subsidiary, NYSE Technologies, completed the purchase of NYFIX on 30 November, which includes NYFIX Marketplace, a 1,000-strong trading community that uses NYFIX’s connectivity and trading services. NYSE Euronext ceased the operations of Euro Millennium immediately following completion of the deal. NYFIX’s US dark pool Millennium was bought on 9 November by US-based agency broker ConvergEx, which plans to operate the trading venue alongside its existing dark pools, VortEx and ConvergEx Cross.
SmartPool will assume Euro Millennium’s role as the technology partner for Swiss Block and will have operational management responsibility for the entity. The transition is expected to be completed by 14 December subject to customer
readiness, at which point Swiss Block will join NYSE Euronext’s Universal Trading Platform (UTP), the exchange group’s single point of connectivity and matching engine.
“SmartPool brings with it significant expertise and an international client base,” said Christian Katz, CEO, SIX Swiss Exchange, in a statement. “Having recently announced a new, highly competitive tariff structure and the launch of our innovative and technologically advanced new platform, this deal adds another leg to our offering as a leading international trading venue.”
Following the closure of Euro Millennium, SmartPool’s Hodgkinson said the firm is now focused on building relationships with the former dark pool’s top 10 customers, which he said made up the “overwhelming majority” of flow on the platform.
“Eight of the largest 10 customers on Euro Millennium are already connected to SmartPool, one will migrate within the next two weeks and we are working to devise a timetable for the other,” Hodgkinson said.
Hodgkinson noted that the similarities between the offerings of the two platforms made a potential amalgamation of their technologies unworkable. “SmartPool and Euro Millennium have a very similar functional scope, but with NYSE Euronext’s UTP we could deliver superior economies of scale in terms of geographical reach and customer community,” said Hodgkinson.
The addition of SmartPool to the UTP on 23 November completed the migration of NYSE Euronext’s European equity trading venues to the platform. The group’s clients can now access its French, Portuguese, Belgian and Dutch exchanges, the NYSE Arca Europe displayed MTF and SmartPool through a single link.
Euro Millennium, which launched in March 2008 – almost a year before SmartPool – has experienced a number of the difficulties of being a pioneer. The first dark pool to be launched after MiFID, Euro Millennium’s volumes were slow to pick up at first, but turnover surged to €488 million in December 2008 from €87.5 million in November and rose even further to €913 million in January 2009, according to figures from Thomson Reuters.
At the time, Chris Smith, Euro Millennium’s CEO, partly attributed the December performance in part to fee holidays and the ‘Experience the Dark’ incentive programme, which took place in September and October.
After falling back in February, as European equity trading volumes plummeted across all venues, Euro Millennium’s turnover reached its all-time peak of €940 million in June. By November, however, turnover had declined to €412 million.
The platform also hit regulatory difficulties. On 14 April 2009, the UK Financial Services Authority forced Euro Millennium to match orders strictly at the mid-point of the best bid and offer in accordance with the reference price pre-trade transparency waiver under MiFID. Until that point, the platform had been offering matches at or within the best bid and offer.
SmartPool, which launched in February 2009, traded €174.5 million in November. It counts HSBC, J.P. Morgan and BNP Paribas among its investors.