Alternative Trading Systems in Europe: Trading Performance by European Venues Post-MiFID

Abstract

This article analyzes a sample of trading activity in Europe, spanning primary exchanges, dark pools, and displayed alternative venues, over the first three quarters of 2009. The article represents the first performance analysis of European venues since the implementation of MiFID. Alternative trading markets, and dark pools in particular, are found to add value relative to primary markets, in the sense of lower trading transaction costs. The risk of slippage also is greatest in primary markets, and dark venues perform better in this respect than the displayed alternative markets. Increased participation in dark pools also is found to be beneficial, and the benefits of higher participation rates increase with the relative size of an order. The aggregate results mask differences across alternative venues, and these differences are documented across five dark venues and between four displayed alternative markets. <b>TOPICS:</b>Exchanges/markets/clearinghouses, performance measurement, developed