Liquidnet reports that XTX and ELPs have found a way to bypass their networking restrictions in a revised joint operational process.
Liquidnet, a leading institutional trading platform, has announced the launch of a new initiative aimed at providing buy-side firms with access to bilateral liquidity from market makers in Europe. The first phase of the service will focus on equities, with ETFs seen as a potential next step.
The initiative, which involves four electronic liquidity providers (ELPs), including XTX Markets, is designed to address concerns about leaked trading axes of large natural flows from institutions. Lack of clear post-trading reporting and flagging in Europe may contribute to the reported high percentage of bilateral activity in European equity volumes, which now represents "close to 50%" according to Liquidnet's recent 'Liquidity Landscape' report.
The workflows offer mid-price and touch executions with configurable, anonymous interaction and monitoring of fill rates and information leakage. Liquidnet's head of execution and quantitative services, EMEA, Gareth Exton, stated that these workflows will not directly interact with liquidity resting in the Liquidnet pool.
The bilateral channel will launch anonymized and remain segregated from Liquidnet's block pool. Only XTX is named publicly as a market maker on the initial bilateral stream; three additional market makers are involved but remain undisclosed.
Exton stated that integrating bilateral liquidity into Liquidnet's front-end application and liquidity-seeking algo suite will give members tools to access meaningful liquidity with confidence and control. Members will choose to explicitly interact with this liquidity via separate workflows, away from the block crossing functionality.
The new channels will sit outside Liquidnet's multilateral trading facility (MTF) and will not touch the firm's protected block-crossing network pool. Liquidnet is in active discussions with all other major liquidity providers, aiming to expand the initiative further.
The stream for bilateral liquidity will sit outside the blocking network, addressing concerns about transparency and reporting. Trades happening in the bilateral stream are intended to address concerns about leaked trading axes of large natural flows from institutions.
The initiative consolidates access to market-maker streams via Liquidnet's front-end application and liquidity-seeking algos, providing a more streamlined and efficient trading experience for buy-side firms. This move is expected to enhance liquidity in European equity markets and improve overall trading efficiency.
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