LONDON (Reuters) - The dark pool for large block trades operated by London Stock Exchange’s Turquoise platform continued to draw in more investors last month as the industry prepares for a sweeping set of regulations that kick in under a year and are set to significantly alter the market structure landscape in Europe.
The value of stocks traded in Turquoise’s Plato Block Discovery, which matches buyers and sellers of large blocks of shares anonymously and away from ‘lit’ exchanges, over February hit 2.36 billion euros, a record, the firm said in a statement.
Turquoise accounted for about 5 percent of total market trading in Europe last month, according to Thomson Reuters aggregates of exchange data. Of hidden or dark order book trading, 15 percent was conducted on Turquoise, making it the third largest dark pool in Europe after UBS MTF and Bats Europe CXE.
Dark pools are private trading platforms that ensure anonymity for institutional investors who want to place large orders without moving the market. They have also attracted the attention of global regulators partly on concerns over transparency.
Under MiFID II regulations, trading in dark pools will be allowed up to certain limits of daily volumes with only large-in-scale orders — defined as those worth between 15,000 and 650,000 euros depending on the stock’s average daily turnover — getting waivers to limits.
These changes have spurred exchange operators to develop block trading platform and find ways of attracting large orders that institutional investors are increasingly interested in.
Norway’s $890-billion sovereign wealth fund, the world’s largest, has backed the formation of dark pools and platforms where large-in-scale trades can be conducted.
Exchange-traded funds (ETFs), passive instruments which track indexes, will be subject to a 1 million euro minimum order size to trade in dark pools - regardless of the average daily turnover of the product, which can vary wildly.
Turquoise opened a platform on which investors can trade ETFs in March 2016.
As institutional investors’ use of ETFs rises, the share of ETFs traded away from lit order books could rise. Assets under management in European ETFs are currently at a record high.
Reporting by Helen Reid, Editing by Vikram Subhedar