Buyside traders expect that MiFID II, the major capital market reforms in force this month, will lead to more block trading and off-exchange activity.
ITG, a brokerage, found over 80% of the 50 traders polled expected strong block volume growth in 2018, following a doubling of it in 2017.
ITG polled buyside traders about how they think the Markets in Financial Instruments Directive II (MiFID II) is likely to impact European trading liquidity this year.
Opinion was split on how MiFID II will impact traders’ ability to access quality liquidity, ITG said. Nearly 40% of those polled expected it to become harder; 18% said it would become easier while the remaining 45% expected no significant impact.
Banks and electronic liquidity providers(ELPs) have registered to establish approximately 100 so-called systematic internalisers (SIs) under MiFID II - though some 88% of traders surveyed expected that there would be fewer than ten relevant ELP SIs in operation at the end of 2018 and 42% expected there would be fewer than five.
Bank-run SIs look to be the more popular choice, said ITG, with two thirds of traders expecting to interact with bank SIs in the first quarter of 2018 versus fewer than 40% for ELP SIs.
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