Multilateral Trading Facility Quote Provides Dark Pool Management
Pan-European multilateral trading facility Quote is offering banks and broker-dealers a way to outsource the operations of their dark pools.
Quote says that its new service QUBE allows users to select from one of two service models depending on whether they use Quote MTF's regulatory license or their own. If the Quote MTF license is used Quote will build the platform and run it for the firm using Quote's own license.
Quote can have firms tailor their MTF with different transparency levels, matching mechanisms and fee models. It will also offer online analytics and market surveillance.
The new offering is based on Quote 's Thymex technology, which Quote says offers execution speeds of 250 microseconds making it Europe's fastest matching engine. The pricetag: as little as E10,000 per month.
The news of the outsourced service follows the exchange's announcement in April that it launched a liquidity-on- demand trading venue giving participants control over how and with whom the trade on its QLX platform. The Hungary-based Quote MTF launched its trading system last year to challenge alternative trading platforms Chi-X Europe, BATS and Turquoise as a low-cost no frills system, but has been struggling to achieve any sizeable volume since then. Operating as a lit trading venue that covers 2,000 stocks across 15 European markets, Quote MTF executed only E934.6 million worth of transactions in April representing 0.13 percent of pan-European market share according to figures provided by Thomson Reuters. In October 2011, Quote cut off ties with its majority backer Peter Beck, owner of brokerage SwiftTrade after the firm fell under investigation by U.K and Canadian regulatory authorities for trade abuses. A holding company called BRMS, controlled by Beck, held a 60 percent stake.
Quote's new offering comes amidst plans by European banks and brokerages to restructure their dark pool trading venues to reduce costs and meet new guidelines imposed by a pending revised version of the Market in Financial Instruments Directive. Many financial firms operate their dark pools -- trading venues that allow investors to trade large blocks of shares anonymously --may end up having to register these pools as either multilateral trading facilities or systematic internalizers. Some banks -- such as HSBC and Societe Generale -- have either turned or will turn to third parties to operate their dark pools; HSBC says it is in talks with NYSE Technologies, while SocGen last month launched AlphaY, run on NYSE Technologies' systems.
Written by Chris Kentouris, Editor-in-chief (Chris can be contacted through Chris.Kentouris@hotmail.com)