Alternative Trading Systems in Europe: Trading
Performance by European Venues Post-MiFID,
2010 Update

Abstract

The authors examine the execution efficiency of European trading venues following the implementation of the Markets in Financial Instruments Directive (MiFID). The current study updates and complements previous work based on 2009 data by using information from the first ten months of 2010. They focus on transactions costs incurred by investors across primary markets, displayed multilateral trading facilities (MTFs), and dark pools. Dark pools continue to add significant value relative to primary markets and MTFs. Transaction costs in dark pools are 13% lower than those of regulated primary markets and 18% lower relative to those of displayed MTFs. MTFs exhibit average costs that are 5% higher than those of primary markets, reversing a finding from 2009. This result is largely due to improvements in trading costs at the primary exchanges over the past year. Primary exchanges appear increasingly efficient in the face of the growth in dark pool activity, which also has not harmed the performance of alternative displayed markets. Finally, aggregate dark pool results disguise significant performance differences between them, with new entrants and pools operated by displayed MTFs displaying the worst performance.