Question of the Week - Feb 16th 2016

What is the expected impact of dark pool caps on Algorithmic trading Strategies?


Chart 1:  Execution Type by Algorithmic Trading Strategy  


Chart 2:  Lit Trading as a Percentage of Total Value Traded by Strategy and Order Size Relative to LIS  

  • MiFID II is expected to have a large impact on dark trading in Europe when the proposed regulations are put in place. Dark pool volume caps will affect algo strategies differently and traders may have to reevaluate their trading strategies as a result.
  • The proportion of dark trading that qualifies for the large in scale waiver varies by strategy; scheduled, liquidity seeking and IS algos all use a very small amount of LIS proportionally. Dark strategies fill the largest percent of value in LIS qualifying sizes, however it still represents under 20% of total value traded.
  • Except in scheduled strategies, the percentage of dark trading increases as order size increase relative to LIS.
  • An in depth study of the effect of MiFID II on dark trading in Europe is avialable in “MiFID 2: Impact of Dark Caps on Algorithmic Trading Strategies.”


One full year of European algorithmic executions were included in the analysis, from Q2 2014 through Q1 2015. The analysis was restricted to securities with market capitalization over $5B and clients who traded with a variety of brokers.


Refer to ITG Peer Analytics for information on available ITG Peer Group Database based analytics.

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