The Gateway to Algorithmic and Automated Trading

Make room for some blocks

Fidessa : Christian Voigt - 6th September 2017

The opinions expressed by this blogger and those providing comments are theirs alone, this does not reflect the opinion of Automated Trader or any employee thereof. Automated Trader is not responsible for the accuracy of any of the information supplied by this article.

Block trading is unique as it enjoys rare bi-partisan support by practitioners and politicians alike. Unfortunately, relatively few people know how to navigate among block venues, due to their inherent opacity. To make matters worse, even fewer market participants command orders exceeding the Large in Scale (LIS) thresholds and decide to execute them in one go rather than put them through the algo-grinder churning out thousands of tiny trades.

With MiFID II, block trading is likely to gain attention, and might even see another golden age. Orders exceeding the LIS minimum order size enjoy flexibilities (i.e. you can trade in the dark at any price you want) which make proper block trading feasible. Under MiFID II, those thresholds will change and whilst for less liquid equities the threshold will be lower than it is currently under MiFID I, highly liquid shares will see a significant increase. But even more important, the regulatory burden for dark trading below the LIS barrier will increase due to the double volume cap. In particular, equities deemed liquid by ESMA will have very few options other than block trading above LIS.

With this in mind, Fidessa is making some room on its fragmentation website and is going to publish a weekly Top of the Blocks report, highlighting where the unique blocks are hiding. Going forward, we are planning to add a number of features to make it even more useful. It goes without saying that we appreciate any feedback that you might have. Certainly we hope that you will find it interesting.