(Bloomberg) -- Barclays Plc, Unilever Plc, and Nestle SA are among hundreds of European equities that exceeded MiFID II's limits on dark-pool trading, triggering restrictions on how they're bought and sold.
The affected contracts will be suspended for six months from being traded in dark pools, which investors use to avoid tipping their hand to the markets. The equities must instead be traded on rival venues or through new methods after the curbs start on March 12.
“Traditional stock exchanges and new platforms run by banks and high-speed traders will probably gain business as a result of ESMA's decision,” Alasdair Haynes, chief executive officer at Aquis Exchange, said before the data were published on Wednesday.
Italian bank UniCredit SpA, asset manager Amundi SA and subprime lender Provident Financial Plc are also among the firms whose shares are covered by the suspension.
The European Union's top markets regulator is clamping down on dark pools as it tries to increase transparency in equities dealing. About 10 percent of trades of the bloc's stocks took place on the venues in the final months of 2017, indicating that fund managers had not changed their strategies ahead of MiFID II's start date in January.
The restrictions on dark pool trading were temporarily delayed that same month, a setback to the revised Markets in Financial Instruments Directive, which is designed to help prevent future financial crises. The data are still not complete, but it's of “utmost importance” that the measure takes effect, the European Securities and Markets Authority said.
More than 700 products breached the limits in January and more than 600 did so in February, ESMA said on Wednesday. The cap was set as 8 percent of trading volume over the previous 12 months and curbs were also placed on trading on each dark pool.
Post-MiFID Trading
Traders who want to keep trades hidden will still have options. They can deal massive blocks of stocks that qualify for an exemption from the ban, use a new breed of venues called systematic internalizers, or use “periodic auctions,” that hide orders until there is enough volume to trigger a trade.
A QuickTake explainer on dark pools
Operators of some of Europe's biggest dark pools -- London Stock Exchange Group Plc's Turquoise unit, Cboe Europe and Investment Technology Group Inc. -- have set up periodic auctions which have all the benefits of dark trading, but technically take place on lit markets. They have also been encouraging fund managers to submit bigger orders that aren't not affected by the bans.
There are signs investors are already embracing the new ways of dealing. Cboe Europe, a unit of Cboe Global Markets Inc., said it has seen a major increase in trading on its periodic-auction service since MiFID's first day.
--With assistance from Will Hadfield
To contact the reporters on this story: Viren Vaghela in London at vvaghela1@bloomberg.net, Silla Brush in London at sbrush@bloomberg.net.
To contact the editors responsible for this story: Neil Callanan at ncallanan@bloomberg.net, Andrew Blackman, Patrick Henry
©2018 Bloomberg L.P.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
