NYSE Euronext has partnered with two European investment banks BNP Paribas and HSBC to develop an electronic block-trading platform for large orders in Pan European stocks in a move that positions the exchange to operate a dark pool under the Markets in Financial Instruments Directive (MiFID).The partnership, known as Project SmartPool, is designing the platform so that users can interact with one another without disguising their identity, size of the trade or price.
NYSE Euronext says it's the first exchange to announce the formation of an electronic block trading market in Europe. The platform will offer trading in all European listed stocks, covering not only the NYSE Euronext exchanges - Netherlands, Belgian, France and Lisbon- but it will also cover all the other EU markets, such as the U.K., Italy and Germany.
As of Nov. 1st, the Markets in Financial Instruments Directive (MiFID) will eliminate the concentration rules, which require orders to be executed on the home country exchange on which a stock is listed. Currently, most of the block trading is done over the counter via the phone in countries where there are no concentration rules. There is some activity on the alternative trading systems in Europe, namely Liquidnet and ITG Posit and some volume goes to the order books of the exchanges.
NYSE Euronext plans to leverage its existing infrastructure to sell-side firms and then build a separate platform for the execution model. The project is a joint venture between NYSE Euronext and the two investment banks, which will have a capital stake in the venture.
NYSE Euronext is the neutral party with a lot of experience in trading platforms, while the two banks have experience in execution models. Since NYSE Euronext already has the connections to the sell-side firms, it believes this can be a successful platform.
Unlike Instinet's Chi-X, a Pan European trading platform that has a limit-order book like exchanges, Project SmartPool is completely different. The platform is considered a dark pool in that it will not disclose any pre-trade information, but will disclose the transactions post-trade. Under European regulations, as in the United States, firms need to disclose the post-trade information but in Europe there can be delayed publication depending on trade size.
Sell-side firms will be able to directly access the platform and the buy-side will be able to access it if they are sponsored by the sell-side. SmartPool is slated for introduction in the second quarter of 2008.NYSE Euronext has partnered with two European investment banks BNP Paribas and HSBC to develop an electronic block-trading platform for large orders in Pan European stocks in a move that positions the exchange to operate a dark pool under the Markets in Financial Instruments Directive (MiFID). Ivy is Editor-at-Large for Advanced Trading and Wall Street & Technology. Ivy is responsible for writing in-depth feature articles, daily blogs and news articles with a focus on automated trading in the capital markets. As an industry expert, Ivy has reported on a myriad ... View Full Bio