Deutsche Börse Cash Market will go live with its dark pool, Xetra Midpoint, on 9 December.
Both offering an alternative route to liquidity and drawing flow from the lit market, dark pools can be a contentious issue – regardless, demand is increasing across Europe. Cboe currently leads the way in dark trading market share, while Aquis and Six Swiss Exchange have been in the dark pool business since 2022 and 2016 respectively. Euronext was the latest to join the fray, launching Mid-Point Match in April, and BME is expected to go live with SpainAtMid before the end of the year.
READ MORE: Welcome to the dark side
This is Deutsche Börse’s second iteration of Xetra Midpoint, after its original dark pool was shuttered in 2017. The group cited MiFID II restrictions on large-in-scale dark trades as the reason for the closure, but it had also faced controversy and dwindling engagement after entering into a partnership with Liquidnet four years earlier. Concerns that Liquidnet members would benefit from undue access to order information led major players to pull out.
Midpoint testing has been taking place over recent months, with Eurex holding ‘functional focus days’ throughout October. The dark pool was expected to be launched in November, following reports in the spring, but was postponed due to regulatory delays at Frankfurt Stock Exchange.
Xetra Midpoint executes orders at the real-time midpoint reference price, and is available to all trading participants on the Frankfurt Stock Exchange. It can be used with a minimum acceptable quantity functionality – meaning orders are only executed if they are matched above a certain share quantity. This mechanism is used to further mitigate information leakage. The venue also allows traders to opt for a sweep order, where as much of the trade as possible is executed in the midpoint book and the remainder is directed to Xetra’s central limit order book.
Michael Krogmann, head of cash market business development at Deutsche Börse, commented: “[Xetra Midpoint] allows traders to keep their strategies private while benefiting from instant connectivity. Market participants can continue to use one of the largest and most trusted trading platforms and, at the same time, profit from significant price improvement by saving half the spread compared to aggressive orders placed in the Xetra central limit order book.”
©Markets Media Europe 2024
