Overall, dark trading (i.e. trading without pre-trade transparency) accounts for about 10% of the order book volume in European equities. Whilst this volume is fragmented across several dark venues and dark market mechanisms, much of it intends to trade at the PBBO midpoint. It provides a robust indication of the actual current price at which securities are trading. As such, an analysis of the proportion of trades occuring away from this price across dark trading venues yields some interesting insights, which are presented in our latest Trading InfoSnack Stale Prices and the Price of Being Stale.

Firstly, the proportion of trades executed away from the PBBO midpoint is significantly more pronounced on certain types of multilateral trading facilities (MTFs), i.e. continuous midpoint books as opposed to conditional order-enabled venues. Secondly, the distribution of ‘stale’ trading activity correlates well with the observed geographical latencies for different types of connectivity between the location of the primary central limit order book and the location of MTFs. Thirdly, trades occurring at ‘stale’ prices appear to suffer from a significantly worse reversion profile than trades occuring at ‘non-stale’ prices.

Darren Marsh

Venues offering conditional order functionality typically show a much smaller proportion of trades executing away from the PBBO midpoint.

Simon McQuoid-Mason, Head Equity Products UK & Ireland

With its next maintenance release of its SWXess trading platform, (SWXess Maintenance Release 10 (SMR10)), the Swiss stock exchange will introduce conditional order functionality via the “SwissAtMid Block Solution”. This will be available for Blue Chip Shares and Mid-/Small-Cap Shares as an extension to our existing dark offering “SwissAtMid”. The SwissAtMid Block solution will make the Swiss stock exchange the most complete venue for trading Swiss equities.

Insights on Relevant Trading and Market Structure Topics

The Trading InfoSnack articles are insightful research features that provide commentary on market relevant trends, models and microstructure that influence the trading of Swiss securities, underpinned by in-depth analysis from the Equities team of SIX Swiss Exchange.

To trading and market structure professionals with a focus on the EMEA region, the previous Trading InfoSnacks are also of interest: This Time is Different, Cryptophoria, Last Orders, Size Matters, Liquidity under the Volatility Microscope, Closing Auctions: What’s Hanging in the Balance?, Back to the Future(s) and What’s in a Liquidity Smile?