London Stock Exchange-owned multilateral trading facility Turquoise has recalibrated its dark pool to favour members that trade in larger size.
The matching logic of the MTF’s mid-point dark pool will now work on a size-time priority, rather than a price-time priority. This means that the largest orders sent to the pool will be executed first, rather than those that are sent to the order book first.
In addition, the minimum size limits that customers can place on their orders have been redesigned.
Previously, minimum size parameters set by the dark pool’s users could be matched against an aggregated collection of smaller orders. The redesigned limits mean each individual fill must adhere to the size threshold set by the member.
Both changes were implemented by Turquoise last Monday.
“These two changes are part of an on-going process to differentiate our dark pool and make it a better place for executing in larger size,” Adrian Farnham, CEO, Turquoise, told theTRADEnews.com.
Farnham added that the introduction of the two new measures coincided with greater use of the dark pool’s periodic random uncross functionality, which allows users to avoid short-term order flow.
Orders placed in the periodic uncross participate in a random auction, held around every ten seconds for liquid stocks.
“This is a pool within a pool designed for more passive liquidity,” said James Baugh, head of pan-European cash equity sales at Turquoise. “We worked with our shareholders and members, who are now offering new order types that allow their buy-side clients to make use of this functionality.”
Baugh added that trades executed via the periodic uncross function are up to six times larger than continuous trading in the mid-point dark pool.
Turquoise’s dark pool was the sixth largest in Europe last month, trading €1.97 billion or 7.1% of total dark MTF volumes, according to data from Thomson Reuters. The largest dark MTF was Chi-X Europe’s Chi-Delta, which executed €5.9 billion, or 21.3% market share.
Turquoise follows Nasdaq OMX Nordic, which also began matching orders on size, rather than time, priority on 28 May, as part of a series of measures designed to discourage high-frequency order flow. A slew of other venues designed to deter HFT participation – including those from Quote MTF, CA Cheuvreux and Société Générale – are also beginning to emerge.