European Equities: Venue Landscape Shifting Under MiFID II

Duncan Higgins, Managing Director
Andre Nogueira, Director
Vesna Straser, Director

The talk since MiFID II’s January 3 go-live date might have shifted in focus but by no means has decreased. The changing market structure dynamics in Europe continue to be in the front of our clients’ minds, in Europe and globally. With a full quarter of trading activity since MiFID II took effect, we are providing an update on the significant changes in equities markets.

ITG has leveraged its unique broker-neutral TCA Global Peer universe of algorithmic trading to compare venue usage from the end of last year through April 12, 2018. This data set provides an exclusive view into how firms are adapting their execution venue choices as a result of the new regulation, including the impact of double volume caps (DVCs) for activity after March 12.

We found that use of both bank-sponsored and ELP systematic internalisers has increased so far in 2018, while broker crossing network flow disappeared. All of this confirms our expectations of how MiFID II would affect the overall market structure in Europe. We believe these trends will strengthen through the rest of 2018 as algorithmic trading providers optimize use of the new and existing venue types.

The most interesting early changes in the venue mix are the emergence of notably different venue profiles for DVC and non-DVC stocks since the DVC implementation. Our data analysis indicates clearly that dark caps created a more fragmented, and likely more challenging, liquidity landscape for capped securities compared with non-capped ones.

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