"We constantly seek to innovate, execute and implement best practice"
Robert Barnes, CEO, Turquoise
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Robert Barnes is chief executive of the multi-lateral trading facility, Turquoise. Appointed in August 2013, he was formerly a managing director of UBS, where he ran the Swiss bank’s own multi-lateral trading facility. An expert on market structures, Barnes holds a PhD from Cambridge University and a BA from Harvard. Here he explains what makes Turquoise stand out in the market and where he hopes to take the business.
Q: WHAT EXACTLY IS TURQUOISE AND WHAT DOES IT DO?
A: Turquoise is a trading platform majority owned by London Stock Exchange Group, in partnership with the user community. Turquoise aims to be the venue of choice for trading European equities. With a single connection to Turquoise, users can trade thousands of equities from 18 countries across Europe.
Q: HOW DOES TURQUOISE DIFFER FROM LONDON STOCK EXCHANGE OR BORSA ITALIANA?
A: London Stock Exchange and Borsa Italiana operate both primary markets, on which companies can list securities, and secondary markets on which investors can trade these securities via respective UK and Italian lit orderbooks. Turquoise is for trading a pan-European stock universe on a choice of lit and dark order books.
Q: WHAT DOES THIS MEAN?
A: Choice of complementary trading mechanisms, including both lit and dark order functionalities, offers customers more tools to achieve best execution.
Q: WHAT ARE FEATURES OF LIT AND DARK ORDER BOOKS?
A: Lit order books display price and size of bids and offers on screen so that orders are visible prior to execution. The benefit is certainty of trade. The challenge is potential market impact. Dark order books mitigate potential market impact by allowing orders to reside in an order book where the price and size of an order is not displayed until after the trade. Users of a dark book, therefore, have no certainty – pre-trade – that another order is in the darkbook. The benefit, however, is the ability to place orders without revealing one’s intention, pre-trade. Furthermore, an investor can peg the non-displayed price of the order in the dark book to follow the mid-point of the bid and offer displayed on the reference lit Exchange. After a trade, the price and size of the completed order is published. This is important as it adds to transparency for all investors, because post-trade transparency is pre-trade transparency for the next trade.
Q: WHAT DOES TURQUOISE OFFER?
A: Turquoise offers access to two discrete order books for complementary liquidity, an Integrated Lit book as well as a dark pool. Turquoise Midpoint Dark features two distinct functionalities: continuous matching at mid-point and Turquoise Uncross™, an innovation that provides randomised midpoint uncrossings during the trading day.
Q: WHAT MAKES THESE SPECIAL?
A: Turquoise Integrated Lit has a wide European stock universe, including emerging markets like Czech Republic and Hungary. Turquoise Midpoint Dark features size priority that promotes larger orders. Turquoise Uncross™ also benefits from its randomised function. Having a series of periodic midpoint uncrossings with a randomised feature means the likelihood of matching at a fair price is higher. The result is that one can rest larger orders for longer and execute when the reference price is more likely at a stable level for a better execution result. We constantly seek to innovate, execute and implement best practice. In recent months we branded Turquoise Uncross™ and widened our stock universe by more than 1450, including small caps across continental Europe and the Nordic region. We optimised our post-trade model and enabled trading of European Rights. We introduced several functional improvements to our lit and dark order books.
Q: ARE THESE INNOVATIONS HAVING AN IMPACT?
A: Yes. Turquoise average daily value traded increased from January 2013 by more than 135 per cent to €4bn per day in April 2014 and is the fastest-growing equity trading platform in Europe by value matched across lit, hidden, dark and auction order books, according to data from Thomson Reuters Equity Market Share Reporter. Turquoise members traded more than €85bn in April 2014, the largest monthly value since Turquoise launched, in more than 2100 stocks, new Turquoise records. Since branding Turquoise Uncross™ in September 2013, values matched using Turquoise Uncross™ increased by more than three times. We have received great feedback from our sell side customers as well as some of the more quantitative buy side that the quality of their executions are very high. Turquoise share of trading, now more than 10% of European total order book value traded, makes Turquoise relevant to customers, existing and prospective, as a venue with meaningful liquidity.
Q: WHO ARE YOUR CUSTOMERS?
A: We are inclusive and welcome firms that meet public membership criteria. Turquoise members today include global banks and brokers, institutions with local regional and sector focus across Europe,specialist trading firms, and retail intermediaries.
Q: HOW DOES TURQUOISE RELATE WITH CUSTOMERS?
A: Turquoise was founded in 2006 by customers for customers and launched in September 2008. As part of LSEG since 2010, we have been able to build on the offerings within the Group while maintaining the independence and spirit that the customers set up when Turquoise originally launched. The governance model cultivates a balanced dialogue with customers.
Q: WHAT ARE YOUR PRIORITIES FOR THE FUTURE?
A: Our leading priority is to highlight the innovation already available on the Turquoise platform, to widen membership, and work with members to refine our existing capabilities. We are listening and we will execute.