Pan-European dark pool NYFIX Euro Millennium has reported that average daily traded value on its platform increased 70% to almost €82 million in May 2009 from around €48 million in December 2008.
Chris Smith, Euro Millennium’s CEO, attributed the rise to a heightened awareness of the benefits of dark pools – such as reduced market impact and price improvement – but also the continued development of brokers’ smart order routers and execution algorithms.
“Between Q4 last year and the first half of this year, a growing number of smart order routers have been developed that are capable of accessing dark pools. Also, broker-dealers have brought more dark-liquidity-seeking algorithms to Europe,” he said.
Smith added that the benefits had not been confined to Euro Millennium, but had boosted dark trading in Europe generally. “Trading volumes have also increased on Turquoise’s dark book and Liquidnet, for example,” he said.
Figures from data vendor Thomson Reuters support NYFIX’s statistics. Euro Millennium’s total turnover leapt to €802.7 million in May 2009 from €495.9 million in December 2008. Over the same period, Liquidnet’s total monthly turnover expanded to €1.4 billion from €706.4 million. However, turnover at agency broker ITG’s POSIT dark pool fell slightly to €470.5 million in May from €503.2 million in December.
In addition, Euro Millennium reported that small- and mid-cap stocks now account for 39% of the pool’s total executed volume, up from 30% in Q1 2009. “The benefits of trading in dark pools are heightened for small- and mid-cap stocks,” said Smith.
Dark pools have made the headlines in the US in recent weeks given the Securities and Exchange Commission’s concerns about inconsistent trade reporting across the various venues. While pools all report trades to the US consolidated tape, it is not possible to isolate trades from particular pool, leaving the venues to self-report their volumes to clients as they see fit.
However, Smith feels it would be premature for such concerns to be raised in Europe. “We are at a different level in Europe,” he said. “There is fragmentation of reporting venues, double-counting of trades and no consolidated post-trade tape. We have still got a long way to go to get consistency around the fragmented market in Europe. Regulators in Europe are more focused on the growth of dark trading and how it fits in with providing a robust and efficient capital market.”
Euro Millennium also announced that its platform can now be accessed through trading technology and data vendor Bloomberg’s buy-side execution management system and sell-side order and execution management system, bringing its total number of live OMS/EMS partnerships to 11.