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Darkness falls upon trading venues  

Goldman Sachs, Morgan Stanley and UBS is to allow their clients to access each others’ European dark pools of liquidity. The agreement follows a similar deal between the three in the US last year, covering their respective Sigma, MSPool and Pin offerings. It comes as NasdaqOMX launched its Neuro Dark trading facility, Chi-X unveils its Chi-Delta non-displayed order book and the London Stock Exchange appointed its technology partners for its Baikal dark pool – Fidessa will develop its order management and smart order routing tech, while QuantHouse will source market data, with BNP Paribas acting as settlement agent. Baikal is finally due to launch later this year. Turquoise is also to aggregate dark liquidity with its TQ Channel, due to launch in July 2009

The decision by the three major banks, Goldman, Morgan Stanley and UBS, to allow algo trading orders received by each firm to interact with the equity liquidity found in their own dark pools, is a reaction to the increased competition in Europe and intended to combat growing fragmentation. The new launches by established exchanges is a reflection that the use of dark pools is expected to increase rapidly in the splintered European marketplace this year.

Chi-Delta is a non-displayed, reference-pegged order book. It runs in parallel to the existing Chi-X Europe visible order book, and caters for smaller order size requirements. Prices on Chi-Delta currently use the Primary Best Bid and Offer (PBBO) as a source of reference prices, although this is expected to change to European Best Bid and Offer (EBBO) shortly, subject to regulatory approval. Mid-peg matching is supported and orders match on a continuous basis. Trade execution costs for orders posted on Chi-Delta will be waived until 31 August. Immediate or cancel orders will be charged at 0.30 bps for execution.

Commenting on the launch, Hirander Misra, chief operating officer of Chi-X Europe, said: “The ability to execute natural liquidity at the mid price, coupled with Chi-X Europe’s low trading fees, provides participants with the potential to make significant basis point savings by trading on both the Chi-X Europe visible order book and Chi-Delta, whilst minimising market impact.”

• Turquoise is to aggregate dark liquidity after it got permission from the Financial Services Authority to operate a liquidity aggregation and order routing service. Due to launch in July 2009, the TQ channel is said to be a first in Europe and will help provide a single point of access to non-displayed liquidity from major trading firms (although the MTF hasn’t said who yet). This potentially allows Turquoise clients to access liquidity in over 1,700 securities in 15 European markets.

Commenting on the new service, Eli Lederman, Turquoise’s chief executive, said: “From the beginning, we’ve been committed to providing innovative, differentiated value to our community. We are thrilled to add TQ Channel to our company, and look forward to the real benefits it will provide to our users.”

• For more on Exchanges see our feature here

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