Traders not anticipating shift towards block trading post-MiFID II

Survey finds traders do not believe MiFID II will not necessarily see them trade large block sizes.

A significant 44% of traders believe MiFID II will not push them to execute in larger block sizes, despite dark pool restrictions largely tipped to cause a shift towards block trading.

A survey conducted by SIX Swiss Exchange found just 8% of traders said regulation would see them trading in large block sizes, while 35% were undecided.

Despite this, 18% of those surveyed were confident the block trading sector would grow by more than 50%, while 30% expect it to grow between 0-50% and 43% predict the market will remain stable.

Tony Shaw, director of the exchange operator’s London office, commented: “Although traders have clear concerns about the impact of regulation they remain confident of stability in their space.”

It is widely thought MiFID II’s restrictions on dark trading are expected to cause a shift towards block trading or trading on lit platforms, with large-in-scale trading venues becoming the favoured method of dark trading. 

Speaking at TradeTech Rob Boardman, CEO of ITG in Europe, told delegates: “Large-in-scale and systematic internaliser proliferation following MiFID II will be significant over the next few years.”

Traders are seemingly taking advantage of the lack of volume cap ahead of MiFID II, with 17% trading more actively and increasing interaction with block sized liquidity.

Although over a third of respondents were undecided on whether the changes will affect the way they trade.

The industry is already feeling the effects of dark trading restrictions and a shift towards block trading venues has been seen well ahead of the January 2018 deadline.

In February, Deutsche Bourse confirmed it would be implementing a new trading system in anticipation of MiFID II‘s large-in-scale waiver and there would be no reason to continue dark pool trading for small-size transactions.

“Xetra MidPoint today supports dark trading for all trade sizes. With the volume thresholds of 4% and 8% in the reference price waiver we see limited potential for this transparency waiver,” the exchange operator said at the time.

Similarly, block trading initiatives and venues from Bats Europe, Euronext, the London Stock Exchange’s Turquoise Plato and Liquidnet, are gaining significant traction ahead of MiFID II.