Deutsche Börse Dark Pool Goes Live on 9 December

Deutsche Börse Cash Market will launch Xetra Midpoint on 9 December. The trading feature is aimed at institutional clients and gives them access to a dark pool that facilitates efficient execution of orders at the midpoint price. Xetra Midpoint is seamlessly integrated into the Xetra reference market where price formation in many German equities and a wide range of ETFs takes place. The new offering ensures that all trades are concluded at the real-time midpoint reference price of these securities. It comes at a time when dark trading is gaining momentum across Europe and meets growing demand from market participants such as large investors trading shares privately to avoid impacting the market price.

Xetra Midpoint allows traders to buy and sell at the midpoint price between the best bid (buy) and best offer (sell) price. This means trades are executed exactly in the middle of the highest price a buyer is willing to pay and the lowest price a seller is willing to accept. Market participants can choose between midpoint orders to trade in the midpoint book only, as well as sweep orders. The latter is immediately executed in the midpoint book to the highest possible extent, and any remaining quantity is instantly entered automatically into the Xetra central limit orderbook.

“Xetra Midpoint is a game-changer for German equities within our Cash Market and a unique value proposition to the market. It allows traders to keep their strategies private while benefiting from instant connectivity. With Xetra, market participants can continue to use one of the largest and most trusted trading platforms and, at the same time, profit from significant price improvement by saving half the spread compared to aggressive orders placed in the Xetra central limit orderbook”, says Michael Krogmann, Head of Cash Market Business Development at Deutsche Börse.

Michael Krogmann, Deutsche Börse

With the market launch, Xetra can be used by all trading participants on the Frankfurt Stock Exchange (Frankfurter Wertpapierbörse – FWB). Order execution in the Xetra Midpoint book follows volume-time priority. Orders may be protected with the MAQ (minimum acceptable quantity) functionality. Various order options are available such as “limit” or “fill-or-kill”. The execution principle maximises the overall execution volume.

The main advantage of a dark pool from an investor’s perspective is that no information leakage takes place once an order is placed at the venue, and therefore other market participants do not adjust their orders as they might do when seeing additional demand to buy or sell a security coming in. Oftentimes, buyside investors instruct their brokers to try dark pool execution before turning to lit markets.

In September 2024, the percentage of turnover in DAX equities in multilateral dark pools was at almost eleven per cent – a record high since the introduction of MiFID II/MiFIR in 2018. About one third of this volume classifies as “large-in-scale”.

Source: Deutsche Börse