Three months after multilateral trading facility (MTF) Turquoise’s dark pool began prioritising size of orders over the time they were entered, average trade sizes have increased by over one-third.
The June shift from price-time to size-time priority, which means larger orders are ranked above the time they were initially sent, has increased average trade sizes in the dark pool from €4,400 before the change, to a figure of €6,000 recorded in September so far, representing a 36% increase.
Adrian Farnham, CEO of Turquoise, said the effects of the changes were expected and showed that participants are altering trading strategies to execute larger orders.
“As a public MTF dark pool, it’s all anonymous – you can’t decide who you trade with, but you can control how you trade, and avoid HFT-style activity if you want to.
“The higher average sizes may reflect algorithms working in slightly different ways, with orders resting longer in the dark pool for instance and it may also reflect an increase in the amount of participants,” Farnham said.
Farnham added that Turquoise's dark pool has also seen increased activity in its periodic uncross functionality, which initiates a random auction in liquid stocks roughly every ten seconds.
Farnham said the average order size for this area of the dark pool had jumped from €9,000 before June, to €22,000 in September.
“It’s about control. Most sophisticated customers are happy to interact with dark liquidity if they can control the way they interact with it. The advantage with a periodic uncross is it gives more control over how the trade executes,” Farnham said.
The changes to Turquoise's dark pool have not yet coincided with a rise in market share. In August, Turquoise’s dark pool was the sixth largest in Europe, capturing 8.2% of dark turnover with €1.96 billion, only slightly higher than May’s 7.1% figure before the new rules came into effect. In August, the largest dark pool was UBS MTF, registering 21.4% market share with €5.14 billion turnover.