12 Days of Trading – Day 12 of 12: Impact of DVC on the Liquidity Landscape

12 Days of Trading – Day 12 of 12: Impact of DVC on the Liquidity Landscape

Day 12 of 12: Impact of DVC on the Liquidity Landscape

In our final view of the series we return to one of the most controversial MiFID II introductions, Double Volume Caps, with a different attempt to assess their impact by examining how UK blue chip volume dispersed before during and after DVC suspensions.

As an explanation for the methodology used for this exercise, in slide one we look at market share before during and after the DVC suspensions. The second slide looks at market share change. The baseline for the calculation is market share before suspension.

Some observations:

  • By definition, stocks that were not suspended trade less in the dark and possibly are less liquid in general. Therefore they trade more on Central Limit Order Books and less in Auctions and naturally, Dark Pools.
  • Behavioural change may be in evidence as alternative mechanisms (auctions in particular) appear to maintain and grow their share post-suspension vs pre-suspension.

Note that this analysis focuses on a relatively small sample of highly liquid stocks (UK100). With our Liquidity Cockpit, broader analysis or a closer look at other markets is possible. The user will reveal if these are consistent pan-European trends or if a different story emerges by market or indeed, market cap.

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On our 12 Days of Trading

As the year draws to a close we have been asked by clients to look and highlight 2018 trends since the introduction of MiFID II. We thought we might make this a festive exercise on the 12 days leading up to the holidays. As a result, you will find a post to a different 2018 big-xyt observation each day.

We hope you enjoy them.

This content has been created using the Liquidity Cockpit API.

About the Liquidity Cockpit

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