.jpg)
NYSE Euronext and two leading European investment banks, BNP Paribas and HSBC, today announced their partnership to create a Multilateral Trading Facility (MTF), to be known as Project SmartPool. This new trading platform is designed to make the execution of large orders in European listed stocks easier.
NYSE Euronext is the first exchange to announce such an electronic block trading market in Europe. Project SmartPool will be accessible to all European sell-side firms.
As of November 1, the Markets in Financial Instruments Directive (MiFID) will eliminate the remaining concentration rules for equity trading that apply within the European Union. This creates an exciting business opportunity for new alternative trading venues (MTFs) that cater to investors’ varied needs. Project SmartPool is specifically designed to meet the trading needs of large institutional order flow, and will complement the limit order book offered by NYSE Euronext in Europe already.
Unlike a traditional exchange, which provides full pre-trade transparency, Project SmartPool will enable users to interact without disclosing their identity or the size or price at which they are willing to trade. This meets financial institutions’ need for minimal information leakage and market impact within the standards set by MiFID. All transactions executed through SmartPool will be published post-trade in compliance with MiFID’s requirements, and cleared and settled more simply using a global solution to be offered by an external party. NYSE Euronext and its partner investment firms will reveal more details of the SmartPool market model during its implementation. They all share a strong belief that the combination of these features and competitive pricing will provide potential users with a powerful incentive to trade large orders through SmartPool.
Project SmartPool will be managed and run by NYSE Euronext, which will retain a majority share of the capital in this joint venture. SmartPool will leverage the advanced technology used by NYSE Euronext and the existing technical infrastructure that links Euronext with its main European sell-side users. This will enable sell-side firms to start using the SmartPool platform for the execution of large orders in European listed stocks as soon as it is launched.
In the United States, alternative trading platforms offering similar services – often referred to as ‘dark liquidity pools’ – have existed for some time and are growing rapidly.
A recent report by Aite Group1 estimates that block trading platforms already process 4.5% of the volume traded in the United States in Q2 2007; the TABB Group2 estimates that this share will grow to at least 15% in 2010. NYSE Euronext and its SmartPool partners believe that the changes heralded by MiFID will trigger similar growth in Europe over time.
NYSE Euronext and its SmartPool partners are finalising the details of this innovative trading venue, and this electronic block trading platform is expected to be introduced in Q2 2008.
Roland Bellegarde, head of European cash markets and member of the NYSE Euronext Management Committee said:
“ With the formation of the Project SmartPool, NYSE Euronext is the first exchange in Europe to announce an electronic block trading market, building a strong alliance between our own experience as the leading European market-place and our partnering banks’ expertise in large order execution. We would welcome further banks who are interested in participating with us in this exciting new project.”
