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Equities trading: Mifid review sheds harsh light on dark pools

New rules boost transparency; Goldman launches MTF

When Goldman Sachs recently announced its intention to launch a new multilateral trading facility (MTF) in Europe it was perhaps a coincidence that the news came in the same month as the European Commission published its Markets in Financial Instruments Directive (Mifid) review consultation document. The migration of dark pool liquidity on to MTF platforms is one of the main changes that the new regulations are expected to trigger, and many in the European equity market see Goldman’s plans as essentially pre-empting this.

But not Goldman itself, which insists this is more than just a regulatory hedge. "This is all about giving end clients access to as deep a liquidity source as possible," says David Shrimpton, incoming COO of Sigma X MTF at Goldman Sachs.

The review of Mifid (or Mifid II as it has been dubbed) has been driven by the EC’s desire for transparency across the system. This means shedding light on private broker crossing networks and essentially subjecting all organized trading facilities (OTFs) to regulation along similar lines. Under the new proposals when a dark pool reaches a certain size threshold (yet to be announced but expected to be around 0.25% of liquidity) it will have to become an MTF and the rules will be tightened on pre- and post-trade transparency.

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