Bats Europe hunts big trades with new block venue

Bats has partnered with US-based BIDS Trading to launch Bats LIS [large-in-scale], according to a statement on August 9.

The anonymous service, which is subject to regulatory approval, will allow buyside firms to acquire and sell large blocks of European equities without revealing their hand to the market.

The move is in response to new European regulations, coming into force in 2018, which will limit the amount of smaller trading conducted on so-called dark pools in a bid to improve trade transparency.

Dark pools were initially devised as a way for asset management firms to trade large orders without moving the market.

However, over the years, the size of trades conducted in dark markets has fallen and a revised version of the EU’s Markets in Financial Instruments Directive is aimed at bringing more trades back into the open. Mifid II will from January 2018 impose limits on dark pool trading but, crucially, ‘large-in-scale’ orders will be exempt from these caps.

Mark Hemsley, chief executive of Bats Europe, said: “There was demand from the buyside for a better block trading facility and that is what we have done. It was a gap for us and we wanted to focus on a block trading solution.”

Bats LIS will use technology from US block trading platform BIDS, which Bats said in its statement would provide “buyside traders with protection against information leakage” when indicating their interest in trades.

FN previously reported talks between the two groups about launching such a platform.

Bats has already made efforts to encourage larger trades via a special order book it launched in October 2015. That order book offered continuous auction-style trading and got off to a strong start. Bats will continue to offer this service – which does not operate like a dark pool – according to Hemsley.

Other trading venues have also taken steps to attract block trades in recent years; among them the London Stock Exchange through its SETS market and Deutsche Börse via its Volume Discovery Service.

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