Tradeweb, the over-the-counter trading venue, is planning a major push in European share trading after agreeing a tie-up with Plato, a consortium of some of the market’s biggest banks and fund managers.
Its offensive into a world dominated by incumbent exchanges and long-established venues comes as fund managers and banks in Europe are still adapting to new rules that have overhauled transparency in equities.
The US-headquartered group will roll out its system, where investors can request electronic quotes from brokers, to trade large blocks of shares in the highly-automated equities world.
It is creating a venture with Plato, a not-for-profit consortium of more than 20 fund managers and banks, including Axa Investment Managers, BlackRock, Fidelity International, Goldman Sachs, Morgan Stanley and Norwegian sovereign wealth fund Norges Bank Investment Management.
Lee Olesky, chief executive of Tradeweb, described the venture as a “significant milestone” for the company, which trades $430bn a day of fixed income, derivatives and exchange-traded funds.
Tradeweb says it can fill a gap in the market that has been created by Mifid II, Europe’s new sweeping market legislation. It forces asset managers to take “all sufficient steps” to most effectively execute their trades and has clamped down on investors’ ability to trade off-exchange, via banks or in dark pools.
Yet a sizeable minority of equities deals in Europe are executed over the phone and investors still want to trade away from an exchange, to prevent others from reading their intentions and moving the market price.
Many exchanges, including Cboe Bats Europe and London Stock Exchange’s Turquoise, have rolled out new services to trade large blocks of shares. The most popular to date have been so-called “periodic auctions” but some regulators have concerns whether they are meeting Mifid’s mandate for transparency.
The “request for quote system” is widely used to do deals in illiquid markets, and venues compete by building rival quotes into a composite picture of the market on a computer screen. It has been approved as Mifid compliant.