Turquoise, a broker-backed pan-European equity trading venue, has received approval from the UK’s Financial Services Authority (FSA) to use an European best bid and offer (EBBO) as the reference price source for its mid-point non-displayed order book.
“We have been granted approval by the FSA to trade at the mid-point of an EBBO reference price,” Duncan Higgins, head of client relationship management, told theTRADEnews.com. “We are now consulting with members to finalise the sufficiently liquid venues we include and a timetable for implementation.”
Turquoise’s mid-point book was launched on 14 April as a separate entity to its main integrated lit and dark platform to allow members to submit dark orders that are smaller than MiFID’s large-in-scale restrictions. To enable this, the mid-point book uses MiFID’s price reference waiver, which exempts it from publishing pre-trade data as long as its prices are pegged to an external reference market.
Dark books employing the reference price waiver typically use the relevant primary market as the reference price source. However, there have been increasing calls from multilateral trading facilities (MTFs) for regulators to permit the use of a pan-European price source.
Following a long consultation with its members and dark pool operators, the Committee of European Securities Regulators (CESR), a supervisory body charged with ensuring consistent securities regulation across the continent, issued guidance on 20 May endorsing the use of an EBBO as a price source for the reference price waiver.
However, as there is so far no standardised EBBO, Higgins said that Turquoise is in discussions with its members about how the benchmark should be formed.
NEURO Dark and Chi-Delta, the respective mid-point dark pools from rival MTFs Nasdaq OMX Europe and Chi-X Europe, have also both requested approval to use an EBBO rather than a primary market reference.