What does the buyside want?
Blocks, that’s what. Sixty-seven percent of hedge fund, private wealth and asset management traders are looking for natural blocks, according to recent Tabb Group research.
The market consultancy interviewed 43 global heads of trading at hedge funds and asset management and private wealth firm in the U.S., U.K. and Europe to establish how they plan to adjust to the latest MiFID proposals and whether regulators will succeed in bringing back the block. In doing so, Tabb learned that a little but 2/3 of institutional traders prefer finding natural blocks than relying on a choice of venue, broker or strategy.
However, only a third are moving from schedule-based trading back to blocks, said Rebecca Healey, a TABB Group consulting analyst who wrote ” target=”_blank”> European Market Abuse Regulation (MAR).
European regulators have now indicated their intention to protect institution-sized business by excluding large-in-size orders from a number of rules related to pre- and post-trade transparency (see RTS 1 and 2 under ESMA’s Regulatory technical and implementing standards – – Access to natural blocks is now the most sought-after commodity sell-side brokers can offer, say nearly half.
– Buyside-to-buyside crossing networks remain first port of call for 56% but the make-up of what constitutes valuable buy-side networks is changing with new alternatives emerging.
– Nearly half believe MIFID II will aid large-sized liquidity discovery; 64% have no concerns regarding the impact of the double volume cap on dark pool trading.
– Information flows remain valued with over 50% placing importance on the level of consistency in Trade Ads and IOIs.
– 70% say IOIs should be included in market manipulation; only 40% took action against perceived misuse of IOIs by brokers.
“With increased market volatility, the ability to discover block liquidity has never been more critical yet harder to achieve, forcing market participants to rethink trading strategies,” said Healey.
