Launching in December, SpainAtMid will be a dark order book with zero-latency dark-to-lit sweep order functionality. Global Trading spoke to Simon McQuoid-Mason, head of equity products at parent company SIX Swiss Exchange, to learn more about the dark landscape in Europe.
“Dark trading on average accounts for approximately 10% of on-book volumes across Europe, so it’s an important part of the market to have an offering in,” said McQuoid-Mason. “Primary exchanges (with the right engineering) are well-placed to shape and stimulate efficient liquidity interactions between dark and lit books that benefit trading participants.”
SwissAtMid, the dark liquidity pool launched by the exchange in 2016, has been a notable success for the firm, and with the new SpainAtMid book, Bolsas y Mercados Españoles (BME) aims to follow in its footsteps.
“In both of our home markets, Switzerland and Spain we have a strong footprint with local members – hence being able to offer them the ability to execute in size at the prevailing PBBO mid-point offers them genuine value add,” explained McQuoid Mason.
The new functionality will be a non-displayed pool allowing the trading of equities at the BBO mid-point of BME’s central limit order book (CLOB); available during the continuous trading phase and supporting the execution of resting, immediate and sweep orders.
BME is currently targeting a technical go-live in production at the end of Q4 2024, focusing on delivering the SpainAtMid continuous mid-point book and dark-lit sweep orders.
“Many of our trading clients are familiar with utilising dark books to find contra liquidity in size, minimise information leakage and/or to seek price improvement at the mid-point,” noted McQuoid-Mason. “We will work with all of our clients, including our local members, to ensure SpainAtMid features as a key destination in their order routing logic. Our experience in Switzerland is that over 75% of our 100+ trading members also trade in SwissAtMid, and that contributes to us having the highest market share of dark trading in Swiss names (circa 40%).”
Dark pools have been a growing trend in Europe, with multiple exchanges launching (or relaunching) their own offerings. Deutsche Borse, which closed its dark pool back in 2017, recently confirmed plans to relaunch its Xetra Midpoint in November 2024; while Euronext in April launched its own Midpoint Match service with a sweep functionality.
“Being the first primary exchange group to offer a dark book on the same atomic matching cycle as the primary central limit order book (in 2016), we have been longtime supporters of the benefits and utility of non-displayed order books. As such, it is good to see renewed interest in this space recently with other primary exchange groups acknowledging the legitimacy of non-displayed execution mechanisms as a core trading tool,” said McQuoid-Mason.
“The renewed focus on the dark trading landscape should help to drive further innovation amongst venues, to the benefit of market participants. However, we need to ensure that there is a level playing field across similar execution mechanisms, promote equal access and multilateral interactions, and innovate in a way that helps to stitch appropriate types of liquidity back together rather than driving further fragmentation.”
The new SpainAtMid functionality is expected to be implemented in the test environment on September 30, 2024 and will go live into production on December 9, 2024.
