Smart order routing is key to success for agency brokers operating in the increasingly fragmented post-MiFID market, according to Instinet Europe.
Interagency broker Instinet Europe says a review of its trading performance from the introduction of MiFID in November last year through to April 2008 found that of the shares traded away from the primary markets on alternative trading venues, clients received price improvement 50.1% of the time (by value traded) and executed at the same price or better 94.2% of the time.
By value traded, executions away from the primary markets in UK, French, German and Dutch equities increased from 11.3% in November 2007 to 27.7% in April 2008, says Instinet Europe. For UK equities alone, in April 2008 Instinet Europe says it executed 37.3% of its volume away from the London Stock Exchange, compared to 14.0% in November 2007.
Richard Balarkas, the new CEO of Instinet Europe, says sceptics suggested that liquidity fragmentation would worsen execution performance, but this has not been the case.
"The introduction of competition in the European stock exchange space has not resulted in any evident deterioration in liquidity opportunities, price formation or execution performance," he says. "In fact, by using innovative smart-routing technology, we have been able to exploit significant pricing opportunities on behalf of our clients."
Industry veteran Balarkas joined Instinet Europe in December after quitting Credit Suisse where he most recently served as global head of sales at the Swiss bank's advanced execution services (AES) division.