LONDON & NEW YORK--(BUSINESS WIRE)--Periodic auction books have proven highly popular in Europe’s new MiFID II equity market landscape, but greater clarity over their regulatory framework would benefit all market participants, says TABB Group. A new report from the US-headquartered research firm, “Growing Pains: The Rapid Rise of Europe’s Periodic Auctions,” looks at the nuances of each periodic auction, as well as potential regulatory measures that could be imposed on the venues.
The platforms have proven to be the perfect antidote to MiFID II’s dark pool caps, being lit venues but with limited pre-trade transparency. The venues have enjoyed a twentyfold increase in volumes since MiFID II go-live, growing to around 2% of total order book volume during the first three months of MiFID II. Volumes have been led by Cboe Europe's platform, but several operators - including ITG, Nasdaq, Goldman Sachs, Turquoise and UBS – already operate, or are planning to set up, periodic auctions.
The rapid growth in periodic auctions has drawn regulatory attention due to concerns over broker self-matching and the extent to which the platforms are price-forming. In certain instances, the platforms can allow brokers to bring pre-agreed crosses together on-venue, mimicking now-banned broker-crossing networks.
An enhanced regulatory framework would reinforce those periodic auctions with stronger attributes around price formation and accessibility of order flow, assuaging concerns held by some market participants, says TABB European equities analyst Tim Cave, who wrote the report. “Periodic auctions have proved divisive, but the devil is in the detail and not all auctions are the same. The venues are valued by investors, have a key role to play in Europe’s equity market and would benefit from having a clearer regulatory framework,” says Cave.
The 20-page, 8-exhibit “Growing Pains” report, available now for download by TABB equities clients and pre-qualified media at https://research.tabbgroup.com/search/grid, covers volumes, execution statistics, the nuances of each platform and five potential regulatory measures that could be imposed on all of the venues. It also has an appendix with diagrams detailing Cboe Europe, ITG Posit, and Nasdaq, Sigma-X MTF, Turquoise Lit and UBS MTF auctions.
About TABB Group
With offices in New York and London, TABB Group is the international research and consulting firm focused exclusively on capital markets, based on the interview-based, “first-person knowledge” research methodology developed by Larry Tabb. For more information, visit www.tabbgroup.com.