SIX Swiss Exchange Survey

Block trading remains a growth area despite trader uncertainty around forthcoming regulations

  • 65% of respondents believe increased regulation, such as MiFID II and FinfraG (Switzerland), will have the biggest impact on their business
  • A significant proportion were bullish regarding their trading space, with 43% convinced of continued stability
  • Nine out of ten traders expect block trading to grow or at least remain stable in the next five years

Regulation is overwhelmingly the biggest hurdle traders face, according to a major survey of equity, bond and other product traders in the UK and Europe conducted by SIX Swiss Exchange. An overwhelming 65% of respondents believed increasing regulation, such as MiFID II and FinfraG, would have the biggest impact on their business.

It is however evident, that traders do not believe their current or future block trades will be effected by the increase in regulation. Of those surveyed, 44% said recent regulatory changes would not push them to trade in larger block sizes – a significant amount compared to the 8% that said it would and compared with the 35% who were undecided.

Traders seem to be taking advantage of the lack of a volume cap ahead of MiFID II’s implementation with 17% trading more actively and increasing the interaction with block sized liquidity. Ahead of the introduction of volume caps in MiFID II, over a third of respondents were undecided on whether the changes will affect the way they trade. An equal number of respondents expected no change to their trading behaviour.

Despite this uncertainty, traders remained confident with regards to growth in the block trading sector, with 18% of respondents expecting the greater than 50% growth in the market and a further 30% of respondents expecting growth between 0-50%. Only 9% of respondents expected a decline in growth, with the remaining 43% of respondents expecting the market to remain stable.

When asked if the UK was more accepting of non-display pool trading than other countries, and therefore the best market place for it, 15% thought that this was the case and 45% stated it was too early to tell.

There are also evidently concerns surrounding key macro level themes. A significant 15% of respondents felt that rising interest rates would have the biggest impact on their firm, whilst Brexit, the global influence of the Chinese economy and competition made up 20% of future concerns to traders.  This is very much echoed in the 52% of respondents who predicted their companies would begin to shrink their workforce over the next three years, with only 15% expecting workforces to grow.

Tony Shaw, Director, London office, said: “Although traders have clear concerns about the impact of regulation they remain confident of stability in their space. Indeed, in block trading almost half expect growth in the next five years and one in five expect that growth to be at least 50%.”