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Flash Boys Aren’t Exploiting Every MiFID Advantage

  • ‘Small tick’ advantage has little demand, so-called SIs say
  • Virtu, Citadel Securities are among firms bypassing exchanges
A financial trader watches data screens at the Frankfurt Stock Exchange, operated by Deutsche Boerse AG, as the U.K. triggers Article 50 of the Lisbon Treaty in Frankfurt, Germany, on Wednesday, March 29, 2017. In a six-page letter submitted on Wednesday to EU President Donald Tusk, U.K. Prime Minister Theresa May formally triggered two years of talks that will end with Britain leaving its largest trading partner after four decades of membership.
Photographer: Krisztian Bocsi/Bloomberg

Here’s another quirk from the early days of MiFID II: algorithmic traders like Virtu Financial Inc. are deliberately opting not to use a pricing advantage.

Systematic internalizers, the new breed of lightly regulated trading venue ushered in by this year’s European regulatory overhaul, aren’t subject to MiFID’s “tick-size” regime governing the minimum increment for stock pricing. Traditional stock markets have feared this would give the venues run by Virtu and more than a dozen other companies an unfair leg up.