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Veteran City Commentator David Buik joins Aquis Exchange in March 2020 and his incisive views on market developments will be posted here each week.

The start of 2020 has sparked a flurry of memories of how things have changed over the past decade or two. The days when national markets were the norm, and ‘Monopoly’ wasn’t just a board game but a descriptor of European National exchanges, are consigned to the records of the ‘noughties’.

Twelve years since the advent of competition in European equities, one major component of trading remains resistant to change. Presently, some 20% of on-order book equities trading in Europe takes place in the closing auctions. For some markets this is closer to 25-30%.

Equity traders have been through the mill of late.  Markets rebounded sharply from the trough late last year only to see prices battered in the spring by ongoing geopolitical tensions. The month of May was particularly rocky with trade talks between the US and China breaking down yet again and UK Prime Minister Theresa May finally throwing in the leadership towel. Finding liquidity can be even trickier in these turbulent times which is why it is crucial to have venues such as Aquis Exchange consistently offering the deepest of pools. 

Aquis Exchange Working On Tool To Help Make Sense Of Data

MiFID II has just celebrated its first birthday and market participants are still coming to grips with RTS 27 and the Best Execution requirements. The first half report card was not encouraging although progress, albeit slowly, is being made. However, market participants will have to pick up the pace as regulators will certainly be bearing down this year.

Michael Lewis’ Flash Boys may get credit for highlighting the maker-taker debate but Aquis Exchange was already way ahead of the curve with its subscription based pricing model when it launched five years ago. It is only now that others seem to be catching up with the US regulators looking into this controversial trading style and Turquoise recently scrapping rebates for certain of its members.

In the not too distant past, it may have been difficult to ascertain whether a kick was offside or ball was over the line but in the past few years, innovative technology such as Hawk-Eye electronic line calling system in tennis, Television Match office (TMO) in rugby, or the Video Assistant Referee (VAR) in football has levelled the playing field. This in turn has renegotiated the fundamentals of the respective games. But there was resistance at first and parallels can be drawn with the recent slew of new regulations in the financial services sector, such as MiFID II.

As Best Execution requirements have significantly tightened under MiFID II, venue analysis has become an important mantra within buyside circles. However, quality of execution is only as good as the source and routing orders to the traditional venues may choke off performance due to high levels of toxicity.  This would not be the case with Aquis Exchange, which does not allow aggressive non-client proprietary trading and offers deep pools of liquidity in Europe’s blue-chip stocks.

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