# To What Extent Did Systematic Internalisers Absorb Block Trading Volume after MiFID II? ▴ Question

**Published:** 2025-07-30
**Categories:** Question

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## Concept

From my perspective as a systems architect observing market structures, the question of how [Systematic Internalisers](https://prime.greeks.live/area/systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (SIs) absorbed block trading volume post-MiFID II is answered by viewing the market as a complex adaptive system. The regulation, specifically the introduction of [Double Volume Caps](https://prime.greeks.live/area/double-volume-caps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (DVCs) on dark pool trading, created a high-pressure point in the existing liquidity pathways. The market, in response, re-routed substantial order flow through a pre-existing but previously underutilized channel ▴ the SI regime.

This was a predictable architectural reconfiguration. The system optimized for efficiency and discretion under a new set of rules, leading to a significant migration of large-scale liquidity away from traditional [dark pools](https://prime.greeks.live/area/dark-pools/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and toward the bilateral execution framework offered by SIs.

The core objective of the Markets in Financial Instruments Directive II ([MiFID II](https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)) was to enhance transparency across European financial markets. A primary mechanism for this was the limitation placed on non-transparent trading, which had become prevalent in dark pools operated as Multilateral Trading Facilities (MTFs). These venues allowed participants to place orders without pre-trade transparency, minimizing the [market impact](https://prime.greeks.live/area/market-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) of large trades. The regulation sought to push more of this volume onto lit exchanges where price formation is public.

To achieve this, MiFID II introduced the DVCs, which restricted the volume of trading in any single stock that could occur in a [dark pool](https://prime.greeks.live/area/dark-pool/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite). Once the caps were breached for a particular instrument, trading in that instrument was suspended on that dark venue for six months.

> The implementation of MiFID II fundamentally altered the cost-benefit analysis for executing large orders, compelling a systemic search for new liquidity pathways.

This regulatory action created an immediate operational challenge for institutional investors and the brokers who serve them. The need to execute large blocks of shares without causing adverse price movements, a primary function of dark pools, remained a constant. The DVCs effectively closed a primary valve for this activity. The market’s response was to seek an alternative that preserved the benefits of off-exchange trading while remaining compliant with the new regulatory framework.

The SI regime presented itself as the most viable and structurally sound alternative. An SI is an investment firm that trades on its own account by executing client orders outside of a regulated market or MTF. This structure provides a bilateral and discreet execution environment, which is highly valuable for sensitive, [large-in-scale](https://prime.greeks.live/area/large-in-scale/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (LIS) orders.

![A transparent geometric object, an analogue for multi-leg spreads, rests on a dual-toned reflective surface. Its sharp facets symbolize high-fidelity execution, price discovery, and market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-digital-asset-derivatives-high-fidelity-execution.jpg)

## The Architectural Shift in Market Liquidity

The absorption of block volume by SIs was a direct consequence of their unique position within the MiFID II architecture. Unlike MTFs, which are multilateral systems connecting many buyers and sellers, an SI operates on a bilateral basis, dealing directly with its client. This distinction is critical. The DVCs were designed to curtail multilateral dark trading.

The bilateral nature of SI activity placed it outside the direct scope of the caps, creating a regulatory release valve. Consequently, investment firms, particularly large banks and electronic market makers, had a strong incentive to register as SIs. Before MiFID II, only a handful of firms operated under this designation. Following its implementation, over one hundred firms registered as SIs, creating a new, deep, and accessible liquidity channel for institutional business.

This migration was not merely a loophole; it was an evolution of market structure. The system adapted. Sell-side firms repurposed their technology and risk management capabilities to operate efficient SI platforms. Buy-side firms, in turn, adjusted their execution protocols to route orders to these new venues.

The result was a significant and rapid reallocation of where and how block trades were executed in Europe. Initial data suggested a dramatic increase in SI market share, with some estimates placing it as high as 30-40% of total volume in certain markets immediately following the directive’s implementation. While subsequent analysis refined these figures to a more modest, yet still substantial, 15-20%, the underlying trend was undeniable. A significant portion of the liquidity that was previously housed in dark pools had found a new home within the SI framework.

![Two smooth, teal spheres, representing institutional liquidity pools, precisely balance a metallic object, symbolizing a block trade executed via RFQ protocol. This depicts high-fidelity execution, optimizing price discovery and capital efficiency within a Principal's operational framework for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/precision-execution-bridging-institutional-liquidity-pools-via-rfq-protocol-for-optimized-digital-asset-derivatives-price-discovery.jpg)

![A translucent teal layer overlays a textured, lighter gray curved surface, intersected by a dark, sleek diagonal bar. This visually represents the market microstructure for institutional digital asset derivatives, where RFQ protocols facilitate high-fidelity execution](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-protocols-driving-optimal-execution.jpg)

## Strategy

The strategic migration of block trading volume to Systematic Internalisers was driven by a confluence of regulatory catalysts and inherent structural advantages. The primary catalyst was the MiFID II Double Volume Cap mechanism, which acted as a direct constraint on dark pool liquidity. The strategic response was to leverage the SI regime, which offered a compliant and efficient alternative for [executing large](https://prime.greeks.live/question/what-are-the-primary-mechanisms-for-mitigating-information-leakage-when-executing-large-orders/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) orders discreetly. This section dissects the strategic calculus behind this shift, examining the mechanics of the DVCs, the comparative advantages of the SI framework, and the resulting evolution of [execution strategies](https://prime.greeks.live/question/how-can-transaction-cost-analysis-be-adapted-to-effectively-measure-the-true-cost-of-execution-for-complex-multi-leg-option-strategies/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) for institutional market participants.

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## The Double Volume Caps as a Forcing Function

To comprehend the strategic shift, one must first understand the operational impact of the DVCs. This mechanism was designed with two thresholds to limit dark trading in individual stocks:

- **Venue-Specific Cap** ▴ A 4% cap on the total [trading volume](https://prime.greeks.live/question/how-does-the-double-volume-cap-directly-influence-algorithmic-trading-logic/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) in a specific stock that could be executed on any single dark pool over a rolling 12-month period.

- **Market-Wide Cap** ▴ An 8% cap on the total trading volume in a specific stock that could be executed across all dark pools in the European Union over the same period.

Once either of these caps was breached, a six-month suspension on dark trading for that stock was imposed on the relevant venue(s). This created significant uncertainty for buy-side traders. A venue that was a reliable source of liquidity one day could become unavailable the next, forcing traders to constantly monitor cap levels and re-route orders. This operational friction made reliance on dark pools for systematic execution strategies problematic.

The DVCs effectively increased the cost and complexity of using dark pools, prompting a strategic search for a more stable and predictable execution channel. The SI regime provided that stability.

![A precision mechanism, symbolizing an algorithmic trading engine, centrally mounted on a market microstructure surface. Lens-like features represent liquidity pools and an intelligence layer for pre-trade analytics, enabling high-fidelity execution of institutional grade digital asset derivatives via RFQ protocols within a Principal's operational framework](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-microstructure.jpg)

## What Are the Comparative Advantages of the SI Regime?

The SI framework offered several distinct advantages over both [lit markets](https://prime.greeks.live/area/lit-markets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) and capped dark pools, making it the strategically optimal destination for displaced block volume. These advantages stem from its unique regulatory classification as a bilateral trading arrangement. The table below outlines the key structural differences that drove the strategic preference for SIs post-MiFID II.

| Feature | Lit Markets (e.g. Exchanges) | Dark Pools (MTFs) | Systematic Internalisers (SIs) |
| --- | --- | --- | --- |
| Execution Model | Multilateral (Central Limit Order Book) | Multilateral (Non-displayed) | Bilateral (Principal to Client) |
| Pre-Trade Transparency | Full transparency of orders and quotes | No pre-trade transparency | Quotes provided to clients upon request; public quotes required for smaller sizes |
| Governing Constraint | Price/time priority rules | Double Volume Caps (DVCs) | No volume caps; trades on own capital |
| Discretion | Low; all orders interact based on public rules | High; orders are hidden until matched | Very High; execution is a private negotiation between SI and client |
| Primary Use Case | General price discovery and retail flow | Minimizing market impact for sub-LIS orders | Executing large blocks with minimal information leakage; providing tailored liquidity |

This structural comparison reveals why SIs became the preferred venue. They combined the discretion of dark pools with freedom from the DVCs. For a portfolio manager needing to execute a large-in-scale (LIS) order, the ability to negotiate a price directly with a counterparty (the SI) without broadcasting intent to the broader market is a paramount concern.

SIs are designed for this exact function. Furthermore, because SIs trade on their own principal account, they have a direct financial incentive to provide competitive pricing and manage the risk of the trade, offering a level of service that is architecturally different from a neutral matching engine.

> The rise of the SI regime illustrates a core principle of market dynamics ▴ liquidity will always flow to the point of greatest efficiency and lowest friction.

![Prime RFQ visualizes institutional digital asset derivatives RFQ protocol and high-fidelity execution. Glowing liquidity streams converge at intelligent routing nodes, aggregating market microstructure for atomic settlement, mitigating counterparty risk within dark liquidity](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-high-fidelity-digital-asset-derivatives-rfq-protocol.jpg)

## Evolution of Execution Strategies

The emergence of a robust SI ecosystem prompted an evolution in buy-side execution strategies. Before MiFID II, a typical [block trading](https://prime.greeks.live/area/block-trading/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) workflow might have heavily prioritized dark MTFs. After the directive, smart order routers (SORs) and execution algorithms were recalibrated to account for the new landscape.

- **Prioritizing SI Liquidity** ▴ SORs were reprogrammed to systematically ping SIs for quotes, especially for orders above a certain size threshold. This often became the first step in the execution process for block trades.

- **Leveraging [Request for Quote](https://prime.greeks.live/area/request-for-quote/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (RFQ)** ▴ The RFQ protocol became a central tool. Instead of passively placing an order in a dark pool, traders could actively solicit competitive quotes from multiple SIs simultaneously, creating a private, competitive auction for their [order flow](https://prime.greeks.live/area/order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

- **Segmenting Order Flow** ▴ Execution strategies became more sophisticated in how they segmented orders. Smaller, less price-sensitive orders might still be routed to lit markets for immediate execution. Sub-LIS orders that were sensitive to market impact might be sent to the remaining dark pool capacity. Large, sensitive block orders were directed primarily to the SI channel.

This strategic adaptation was facilitated by the sell-side’s rapid development of SI capabilities. Many SIs created networks by connecting their quoting engines, effectively creating a virtual, decentralized pool of liquidity. This allowed a client to access a wide range of potential counterparties through a single connection, recreating some of the network benefits of a multilateral venue without the associated regulatory burdens of the DVCs. The market had effectively engineered a new, resilient architecture for block trading that was fully compliant with the letter of MiFID II.

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## Execution

From an execution standpoint, the absorption of block volume by Systematic Internalisers represents a shift from passive matching to active engagement. Executing a large order via an SI is a fundamentally different process than placing it in a [central limit order book](https://prime.greeks.live/area/central-limit-order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) or a dark pool. It is a protocol of direct, bilateral negotiation, facilitated by technology but rooted in the principles of principal trading. This section provides a granular analysis of the execution mechanics, the operational protocols involved, and the key considerations for achieving high-fidelity execution within the SI framework.

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## The Request for Quote Protocol in Practice

The primary mechanism for interacting with an SI is the Request for Quote (RFQ) protocol. This is a structured communication process where a client (the buy-side firm) solicits a firm price from one or more SIs for a specific instrument and size. The execution workflow is precise and designed for efficiency and discretion.

- **Order Origination** ▴ A portfolio manager decides to execute a block trade. The order is passed to the trading desk, typically through an Order Management System (OMS).

- **Venue Selection and RFQ Initiation** ▴ The trader, often aided by an Execution Management System (EMS), selects a list of SIs to whom the RFQ will be sent. The EMS may automate this selection based on historical performance data for specific SIs in that particular stock.

- **Secure Communication** ▴ The RFQ is sent electronically to the selected SIs over secure, private channels (e.g. FIX protocol). The request contains the instrument identifier (e.g. ISIN), the side (buy or sell), and the quantity. The client’s identity is known to the SI.

- **SI Quoting and Risk Pricing** ▴ Upon receiving the RFQ, each SI’s internal pricing engine calculates a firm quote. This price is based on the current market price (e.g. the midpoint of the European Best Bid and Offer), the SI’s own inventory risk, expected volatility, and the potential cost of hedging the position. The quote is firm for a short period (typically a few seconds).

- **Client Response and Execution** ▴ The client’s EMS aggregates the quotes received from all SIs. The trader can then execute against the best price by sending a confirmation message to the chosen SI. The trade is executed bilaterally between the client and the SI.

- **Post-Trade Reporting** ▴ The SI is responsible for reporting the trade publicly. Under MiFID II, trades are reported as soon as technologically possible. However, for large-in-scale (LIS) trades, publication can be deferred, further protecting the client from [information leakage](https://prime.greeks.live/question/how-can-a-leakage-model-differentiate-between-market-impact-and-systemic-information-leakage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

This protocol provides the buy-side trader with significant control. It allows them to create a competitive environment for their order flow in a private setting, ensuring they receive a fair price without signaling their trading intention to the public market.

![A sleek, dark teal, curved component showcases a silver-grey metallic strip with precise perforations and a central slot. This embodies a Prime RFQ interface for institutional digital asset derivatives, representing high-fidelity execution pathways and FIX Protocol integration](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine.jpg)

## How Do SIs Manage the Absorbed Liquidity?

When an SI executes a client’s block order, it takes the other side of the trade onto its own book. The SI becomes the principal counterparty. This introduces risk, which the SI must manage. The method of risk management determines the quality of the SI’s service.

- **Internalization against Inventory** ▴ If the SI has an offsetting position in its own inventory, it can internalize the trade with no market impact. This is the ideal scenario.

- **Hedging in Lit Markets** ▴ More commonly, the SI will need to hedge the position it has acquired. It will do this by carefully working the position in lit markets, using sophisticated algorithms to minimize its own trading footprint. The SI’s skill in hedging is a key determinant of the price it can offer the client. A more efficient hedger can offer a sharper price.

- **Connecting to Other Liquidity Sources** ▴ Many SIs do not operate in isolation. They are connected to a vast network of other liquidity providers, including other SIs, exchanges, and dark pools. Upon receiving an RFQ, an SI might itself send out requests to its own network to find the other side before providing a final quote to the client. This allows them to act as liquidity aggregators, offering the client access to a broader pool of capital.

> High-fidelity execution through an SI depends directly on the SI’s sophistication in risk pricing, hedging, and liquidity sourcing.

![Central nexus with radiating arms symbolizes a Principal's sophisticated Execution Management System EMS. Segmented areas depict diverse liquidity pools and dark pools, enabling precise price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-liquidity-orchestration.jpg)

## Execution Quality Analysis and Regulatory Evolution

A critical component of the execution process is [Transaction Cost Analysis](https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite) (TCA). Buy-side firms must continuously measure the quality of execution they receive from their SI counterparties. Key metrics include:

- **[Price Improvement](https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite)** ▴ The extent to which the execution price was better than the prevailing European Best Bid and Offer (EBBO) at the time of the RFQ. Initially, many SIs offered sub-tick price improvement, a significant advantage.

- **Information Leakage** ▴ Measuring adverse price movement in the moments and hours after a block trade is executed. Effective SI execution should result in minimal post-trade market impact.

- **Reversion** ▴ Analyzing whether the price reverts after the trade, which can indicate that the execution price was aggressive and potentially unsustainable.

The regulatory environment has also continued to evolve. One of the most significant changes was the extension of the tick size regime to SIs. Lit markets operate on standardized price increments (ticks). Initially, SIs could quote at prices inside this tick, offering marginal but meaningful price improvement.

When regulators harmonized the rules and required SIs to adhere to the same tick sizes, it removed this specific advantage. This change leveled the playing field slightly but did not alter the fundamental structural benefits of the SI regime for block trading ▴ discretion and the absence of [volume caps](https://prime.greeks.live/area/volume-caps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite).

The table below provides a comparative analysis of the execution process for a LIS block trade, highlighting the operational distinctions that cemented the SI’s role post-MiFID II.

| Execution Step | Process on a Lit Market | Process via a Systematic Internaliser |
| --- | --- | --- |
| Order Submission | Order is placed in the Central Limit Order Book, often sliced into smaller pieces by an algorithm (e.g. VWAP, TWAP). | A single Request for Quote (RFQ) is sent to a selected group of SIs. |
| Price Discovery | Public and continuous. The order interacts with all visible liquidity based on price-time priority. High risk of market impact. | Private and on-demand. Price is discovered through a competitive, bilateral negotiation. Low risk of information leakage. |
| Counterparty | Anonymous market participants. | The SI acts as a known principal counterparty. |
| Execution Certainty | Dependent on available liquidity in the order book. The full block may not be filled at the desired price. | High certainty of execution for the full block size once a quote is accepted. |
| Post-Trade Reporting | Immediate public reporting of each fill. | Reporting can be deferred for Large-in-Scale (LIS) trades, preserving anonymity. |

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## References

- Autorité des Marchés Financiers. “Quantifying systematic internalisers’ activity ▴ their share in the equity market structure and role.” AMF, 2020.

- CFA Institute. “MiFID II and Systematic Internalisers ▴ If Only Someone Knew This Would Happen.” 13 July 2018.

- FlexTrade. “MiFID II’s Trading Hereafter ▴ Systematic Internalizers & Block Venues.” 28 March 2018.

- International Capital Market Association. “MiFID II implementation ▴ the Systematic Internaliser regime.” ICMA, 6 April 2017.

- European Securities and Markets Authority. “Public Statement on the transition for the application of the MiFID II/MiFIR review.” ESMA, 27 March 2024.

![The image displays a sleek, intersecting mechanism atop a foundational blue sphere. It represents the intricate market microstructure of institutional digital asset derivatives trading, facilitating RFQ protocols for block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-prime-os-rfq-execution.jpg)

## Reflection

The migration of block liquidity to Systematic Internalisers is a powerful illustration of how market architecture responds to regulatory pressure. It demonstrates that liquidity is not static; it is a dynamic force that will always seek the most efficient and least restrictive path. The knowledge of this event is a component in a larger system of institutional intelligence. How does your own execution framework account for such structural adaptations?

Is your system for sourcing liquidity agile enough to respond not just to market volatility, but to regulatory evolution? The true operational edge lies in designing a trading architecture that anticipates these shifts, treating regulatory change as another input in a continuously optimizing system.

![Reflective planes and intersecting elements depict institutional digital asset derivatives market microstructure. A central Principal-driven RFQ protocol ensures high-fidelity execution and atomic settlement across diverse liquidity pools, optimizing multi-leg spread strategies on a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-precision.jpg)

## Glossary

<a href="https://prime.greeks.live/area/systematic-internalisers/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision instrument probes a speckled surface, visualizing market microstructure and liquidity pool dynamics within a dark pool. This depicts RFQ protocol execution, emphasizing price discovery for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-flow.jpg)

## Systematic Internalisers

Meaning ▴ A market participant, typically a broker-dealer, systematically executing client orders against its own inventory or other client orders off-exchange, acting as principal. </a><a href="https://prime.greeks.live/area/double-volume-caps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![The abstract composition visualizes interconnected liquidity pools and price discovery mechanisms within institutional digital asset derivatives trading. Transparent layers and sharp elements symbolize high-fidelity execution of multi-leg spreads via RFQ protocols, emphasizing capital efficiency and optimized market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-market-microstructure-1.jpg)

## Double Volume Caps

Meaning ▴ Double Volume Caps refer to a regulatory mechanism under MiFID II designed to limit the amount of equity trading that can occur under specific pre-trade transparency waivers. </a><a href="https://prime.greeks.live/area/dark-pools/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract layered forms visualize market microstructure, featuring overlapping circles as liquidity pools and order book dynamics. A prominent diagonal band signifies RFQ protocol pathways, enabling high-fidelity execution and price discovery for institutional digital asset derivatives, hinting at dark liquidity and capital efficiency](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-institutional-digital-asset-derivatives-rfq-protocol.jpg)

## Dark Pools

Meaning ▴ Dark Pools are alternative trading systems (ATS) that facilitate institutional order execution away from public exchanges, characterized by pre-trade anonymity and non-display of liquidity. </a><a href="https://prime.greeks.live/area/market-impact/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A refined object, dark blue and beige, symbolizes an institutional-grade RFQ platform. Its metallic base with a central sensor embodies the Prime RFQ Intelligence Layer, enabling High-Fidelity Execution, Price Discovery, and efficient Liquidity Pool access for Digital Asset Derivatives within Market Microstructure](https://options.greeks.live/wp-content/uploads/2025/08/prime-os-rfq-protocols-for-digital-asset-derivatives-execution.jpg)

## Market Impact

Meaning ▴ Market Impact refers to the observed change in an asset's price resulting from the execution of a trading order, primarily influenced by the order's size relative to available liquidity and prevailing market conditions. </a><a href="https://prime.greeks.live/area/mifid-ii/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract structure combines opaque curved components with translucent blue blades, a Prime RFQ for institutional digital asset derivatives. It represents market microstructure optimization, high-fidelity execution of multi-leg spreads via RFQ protocols, ensuring best execution and capital efficiency across liquidity pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-optimizing-market-microstructure-for-high-fidelity-execution-best-execution-price-discovery-across-liquidity-pools-and-prime-os.jpg)

## Mifid Ii

Meaning ▴ MiFID II, the Markets in Financial Instruments Directive II, constitutes a comprehensive regulatory framework enacted by the European Union to govern financial markets, investment firms, and trading venues. </a><a href="https://prime.greeks.live/area/dark-pool/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A slender metallic probe extends between two curved surfaces. This abstractly illustrates high-fidelity execution for institutional digital asset derivatives, driving price discovery within market microstructure](https://options.greeks.live/wp-content/uploads/2025/07/precision-instrument-navigating-institutional-digital-asset-derivatives-rfq-protocols-for-optimal-price-discovery-and-high-fidelity-execution.jpg)

## Dark Pool

Meaning ▴ A Dark Pool is an alternative trading system (ATS) or private exchange that facilitates the execution of large block orders without displaying pre-trade bid and offer quotations to the wider market. </a><a href="https://prime.greeks.live/area/large-in-scale/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A polished, dark blue domed component, symbolizing a private quotation interface, rests on a gleaming silver ring. This represents a robust Prime RFQ framework, enabling high-fidelity execution for institutional digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/08/optimized-execution-for-institutional-digital-asset-derivatives-rfq.jpg)

## Large-In-Scale

Meaning ▴ Large-in-Scale designates an order quantity significantly exceeding typical displayed liquidity on lit exchanges, necessitating specialized execution protocols to mitigate market impact and price dislocation. </a><a href="https://prime.greeks.live/question/how-can-transaction-cost-analysis-be-adapted-to-effectively-measure-the-true-cost-of-execution-for-complex-multi-leg-option-strategies/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Two sleek, abstract forms, one dark, one light, are precisely stacked, symbolizing a multi-layered institutional trading system. This embodies sophisticated RFQ protocols, high-fidelity execution, and optimal liquidity aggregation for digital asset derivatives, ensuring robust market microstructure and capital efficiency within a Prime RFQ](https://options.greeks.live/wp-content/uploads/2025/07/institutional-grade-digital-asset-derivatives-platform-architecture-high-fidelity-execution-protocols-and-liquidity-aggregation.jpg)

## Execution Strategies

Adapting TCA for options requires benchmarking the holistic implementation shortfall of the parent strategy, not the discrete costs of its legs. </a><a href="https://prime.greeks.live/question/what-are-the-primary-mechanisms-for-mitigating-information-leakage-when-executing-large-orders/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Circular forms symbolize digital asset liquidity pools, precisely intersected by an RFQ execution conduit. Angular planes define algorithmic trading parameters for block trade segmentation, facilitating price discovery](https://options.greeks.live/wp-content/uploads/2025/07/optimized-digital-asset-rfq-execution-latent-liquidity-capture-protocol.jpg)

## Executing Large

Mitigating information leakage requires architecting an execution that obscures intent through algorithmic dispersion, venue selection, and discreet liquidity sourcing. </a><a href="https://prime.greeks.live/question/how-does-the-double-volume-cap-directly-influence-algorithmic-trading-logic/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Robust polygonal structures depict foundational institutional liquidity pools and market microstructure. Transparent, intersecting planes symbolize high-fidelity execution pathways for multi-leg spread strategies and atomic settlement, facilitating private quotation via RFQ protocols within a controlled dark pool environment, ensuring optimal price discovery](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-execution-microstructure-prime-os.jpg)

## Trading Volume

The Double Volume Cap directly influences algorithmic trading by forcing a dynamic rerouting of liquidity from dark pools to alternative venues. </a><a href="https://prime.greeks.live/area/lit-markets/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A polished sphere with metallic rings on a reflective dark surface embodies a complex Digital Asset Derivative or Multi-Leg Spread. Layered dark discs behind signify underlying Volatility Surface data and Dark Pool liquidity, representing High-Fidelity Execution and Portfolio Margin capabilities within an Institutional Grade Prime Brokerage framework](https://options.greeks.live/wp-content/uploads/2025/07/prime-os-rfq-block-trade-liquidity-execution-microstructure-analytics.jpg)

## Lit Markets

Meaning ▴ Lit Markets are centralized exchanges or trading venues characterized by pre-trade transparency, where bids and offers are publicly displayed in an order book prior to execution. </a><a href="https://prime.greeks.live/area/block-trading/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, precision-engineered device with a split-screen interface displaying implied volatility and price discovery data for digital asset derivatives. This institutional grade module optimizes RFQ protocols, ensuring high-fidelity execution and capital efficiency within market microstructure for multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-module.jpg)

## Block Trading

Meaning ▴ Block Trading denotes the execution of a substantial volume of securities or digital assets as a single transaction, often negotiated privately and executed off-exchange to minimize market impact. </a><a href="https://prime.greeks.live/area/request-for-quote/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A sleek, illuminated control knob emerges from a robust, metallic base, representing a Prime RFQ interface for institutional digital asset derivatives. Its glowing bands signify real-time analytics and high-fidelity execution of RFQ protocols, enabling optimal price discovery and capital efficiency in dark pools for block trades](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-system-for-optimal-execution.jpg)

## Request for Quote

Meaning ▴ A Request for Quote, or RFQ, constitutes a formal communication initiated by a potential buyer or seller to solicit price quotations for a specified financial instrument or block of instruments from one or more liquidity providers. </a><a href="https://prime.greeks.live/area/order-flow/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract, sleek forms represent an institutional-grade Prime RFQ for digital asset derivatives. Interlocking elements denote RFQ protocol optimization and price discovery across dark pools](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-engine-5.jpg)

## Order Flow

Meaning ▴ Order Flow represents the real-time sequence of executable buy and sell instructions transmitted to a trading venue, encapsulating the continuous interaction of market participants' supply and demand. </a><a href="https://prime.greeks.live/area/central-limit-order-book/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![A precision-engineered, multi-layered mechanism symbolizing a robust RFQ protocol engine for institutional digital asset derivatives. Its components represent aggregated liquidity, atomic settlement, and high-fidelity execution within a sophisticated market microstructure, enabling efficient price discovery and optimal capital efficiency for block trades](https://options.greeks.live/wp-content/uploads/2025/08/institutional-digital-asset-derivatives-rfq-protocol-engine.jpg)

## Central Limit Order Book

Meaning ▴ A Central Limit Order Book is a digital repository that aggregates all outstanding buy and sell orders for a specific financial instrument, organized by price level and time of entry. </a><a href="https://prime.greeks.live/question/how-can-a-leakage-model-differentiate-between-market-impact-and-systemic-information-leakage/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Sleek, dark components with a bright turquoise data stream symbolize a Principal OS enabling high-fidelity execution for institutional digital asset derivatives. This infrastructure leverages secure RFQ protocols, ensuring precise price discovery and minimal slippage across aggregated liquidity pools, vital for multi-leg spreads](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-rfq-protocol-systemic-execution-interface.jpg)

## Information Leakage

A leakage model isolates the cost of compromised information from the predictable cost of liquidity consumption. </a><a href="https://prime.greeks.live/area/transaction-cost-analysis/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Crossing reflective elements on a dark surface symbolize high-fidelity execution and multi-leg spread strategies. A central sphere represents the intelligence layer for price discovery](https://options.greeks.live/wp-content/uploads/2025/07/precision-algorithmic-trading-across-intersecting-liquidity-pools-for-institutional-digital-asset-derivatives-rfq-protocols.jpg)

## Transaction Cost Analysis

Meaning ▴ Transaction Cost Analysis (TCA) is the quantitative methodology for assessing the explicit and implicit costs incurred during the execution of financial trades. </a><a href="https://prime.greeks.live/area/price-improvement/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Abstract planes delineate dark liquidity and a bright price discovery zone. Concentric circles signify volatility surface and order book dynamics for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-high-fidelity-execution-3.jpg)

## Price Improvement

Meaning ▴ Price improvement denotes the execution of a trade at a more advantageous price than the prevailing National Best Bid and Offer (NBBO) at the moment of order submission. </a><a href="https://prime.greeks.live/area/volume-caps/?utm_source=options.greeks.live&utm_medium=referral&utm_campaign=satellite" class="glossary-item-box">
![Intersecting structural elements form an 'X' around a central pivot, symbolizing dynamic RFQ protocols and multi-leg spread strategies. Luminous quadrants represent price discovery and latent liquidity within an institutional-grade Prime RFQ, enabling high-fidelity execution for digital asset derivatives](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocols-enabling-high-fidelity-execution-across-disparate-liquidity-pools.jpg)

## Volume Caps

Meaning ▴ Volume Caps define the maximum quantity of an asset or notional value that a single order or a series of aggregated orders can execute within a specified timeframe or against a particular liquidity source. </a>

**Tags:** [Central Limit Order Book](https://options.greeks.live/area/central-limit-order-book/), [Double Volume Caps](https://options.greeks.live/area/double-volume-caps/), [Price Improvement](https://options.greeks.live/area/price-improvement/), [European Equity Markets](https://options.greeks.live/area/european-equity-markets/), [Execution Strategy](https://options.greeks.live/area/execution-strategy/), [Market Microstructure](https://options.greeks.live/area/market-microstructure/)	

## Discover More

- 
### [What Is the Difference in Price Discovery between Lit and Dark Markets?](https://options.greeks.live/question/what-is-the-difference-in-price-discovery-between-lit-and-dark-markets/)
![A slender metallic probe extends between two curved surfaces. This abstractly illustrates high-fidelity execution for institutional digital asset derivatives, driving price discovery within market microstructure. It represents Prime RFQ protocol precision navigating dark liquidity for best execution and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/precision-instrument-navigating-institutional-digital-asset-derivatives-rfq-protocols-for-optimal-price-discovery-and-high-fidelity-execution.jpg)

Lit markets create price via transparent order books; dark markets execute trades privately using those prices.

- 
### [How Do Systematic Internalisers Complicate Best Execution in the European Union?](https://options.greeks.live/question/how-do-systematic-internalisers-complicate-best-execution-in-the-european-union/)
![A precisely engineered system features layered grey and beige plates, representing distinct liquidity pools or market segments, connected by a central dark blue RFQ protocol hub. Transparent teal bars, symbolizing multi-leg options spreads or algorithmic trading pathways, intersect through this core, facilitating price discovery and high-fidelity execution of digital asset derivatives via an institutional-grade Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-facilitating-high-fidelity-multi-leg-options-spread-execution-best-price-discovery-and-latent-liquidity-access-for-prime-brokerage.jpg)

Systematic Internalisers complicate best execution by fragmenting liquidity into private, principal-based pools, demanding advanced analytics to prove value over transparent, public markets.

- 
### [How Do Systematic Internalisers Fit into a Post-DVC Trading Landscape?](https://options.greeks.live/question/how-do-systematic-internalisers-fit-into-a-post-dvc-trading-landscape/)
![Intersecting concrete structures symbolize the robust Market Microstructure underpinning Institutional Grade Digital Asset Derivatives. Dynamic spheres represent Liquidity Pools and Implied Volatility. A sophisticated cylindrical Crypto Derivatives OS facilitates High-Fidelity Execution through RFQ protocols, enabling Block Trade and Multi-Leg Spread strategies, ensuring Capital Efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-framework-optimizing-rfq-execution-and-liquidity-for-principal-trading.jpg)

Systematic Internalisers provide essential, regulated bilateral liquidity in a post-DVC landscape, absorbing flow from capped dark pools.

- 
### [How Is the Adoption of RFQ Protocols Impacting the Structure of Modern Financial Markets?](https://options.greeks.live/question/how-is-the-adoption-of-rfq-protocols-impacting-the-structure-of-modern-financial-markets/)
![A transparent, convex lens, intersected by angled beige, black, and teal bars, embodies institutional liquidity pool and market microstructure. This signifies RFQ protocols for digital asset derivatives and multi-leg options spreads, enabling high-fidelity execution and atomic settlement via Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-execution-of-institutional-digital-asset-derivatives-via-advanced-rfq-protocols-for-multi-leg-spreads.jpg)

The adoption of RFQ protocols re-architects market structure by layering a discreet, relationship-based negotiation system over anonymous lit markets.

- 
### [How Has the MiFID II Definition of an RFQ System Impacted Equity Market Structure?](https://options.greeks.live/question/how-has-the-mifid-ii-definition-of-an-rfq-system-impacted-equity-market-structure/)
![A precise, multi-faceted geometric structure represents institutional digital asset derivatives RFQ protocols. Its sharp angles denote high-fidelity execution and price discovery for multi-leg spread strategies, symbolizing capital efficiency and atomic settlement within a Prime RFQ.](https://options.greeks.live/wp-content/uploads/2025/07/digital-asset-derivatives-rfq-execution-microstructure-framework.jpg)

MiFID II's RFQ definition re-architected equity execution, shifting block liquidity to a structured, data-driven SI-centric model.

- 
### [How Do Regulations like MiFID II Affect Block Trading in Europe?](https://options.greeks.live/question/how-do-regulations-like-mifid-ii-affect-block-trading-in-europe/)
![Sharp, layered planes, one deep blue, one light, intersect a luminous sphere and a vast, curved teal surface. This abstractly represents high-fidelity algorithmic trading and multi-leg spread execution. The sphere symbolizes a prime brokerage liquidity pool, interacting with latent liquidity for optimal RFQ protocol price discovery within complex market microstructure.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-execution-system-microstructure.jpg)

MiFID II reshaped European block trading by capping dark pool volumes, forcing a strategic shift to LIS waivers, periodic auctions, and systematic internalisers.

- 
### [How Do Regulatory Frameworks like Mifid Ii Impact the Strategic Choice between Exchanges and Sis for Different Asset Classes?](https://options.greeks.live/question/how-do-regulatory-frameworks-like-mifid-ii-impact-the-strategic-choice-between-exchanges-and-sis-for-different-asset-classes/)
![A central translucent disk, representing a Liquidity Pool or RFQ Hub, is intersected by a precision Execution Engine bar. Its core, an Intelligence Layer, signifies dynamic Price Discovery and Algorithmic Trading logic for Digital Asset Derivatives. Surrounding elements denote Market Microstructure and High-Fidelity Execution pathways for Block Trades, ensuring Best Execution within a Prime RFQ framework.](https://options.greeks.live/wp-content/uploads/2025/07/institutional-digital-asset-derivatives-rfq-protocol-engine-visualizing-microstructure.jpg)

MiFID II compels a data-driven choice between exchange transparency and SI discretion, optimizing execution by asset class.

- 
### [How Do MiFID II Volume Caps Directly Influence the Choice between Dark Pools and RFQ Systems?](https://options.greeks.live/question/how-do-mifid-ii-volume-caps-directly-influence-the-choice-between-dark-pools-and-rfq-systems/)
![A polished, two-toned surface, representing a Principal's proprietary liquidity pool for digital asset derivatives, underlies a teal, domed intelligence layer. This visualizes RFQ protocol dynamism, enabling high-fidelity execution and price discovery for Bitcoin options and Ethereum futures.](https://options.greeks.live/wp-content/uploads/2025/07/high-fidelity-digital-asset-derivatives-rfq-platform-intelligence-layer.jpg)

MiFID II volume caps force a strategic pivot from anonymous dark pools to bilateral RFQ systems for sourcing block liquidity.

- 
### [How Might a Higher Lis Threshold Change the Business Model for Venues That Specialize in Block Trading?](https://options.greeks.live/question/how-might-a-higher-lis-threshold-change-the-business-model-for-venues-that-specialize-in-block-trading/)
![Precision mechanics illustrating institutional RFQ protocol dynamics. Metallic and blue blades symbolize principal's bids and counterparty responses, pivoting on a central matching engine. This visualizes high-fidelity execution and price discovery for digital asset derivatives, emphasizing low latency and capital efficiency.](https://options.greeks.live/wp-content/uploads/2025/07/precision-institutional-digital-asset-derivatives-rfq-execution-engine-microstructure.jpg)

A higher LIS threshold forces block trading venues to evolve from simple matching engines to sophisticated execution solution providers.

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        "caption": "An advanced Execution Management System bridges distinct Market Microstructure environments, crucial for Institutional Grade Digital Asset Derivatives trading. This Prime RFQ platform facilitates High-Fidelity Execution by leveraging RFQ protocols for Block Trade and Private Quotation, accessing diverse Liquidity Pools. One pool enables transparent Price Discovery, while the other represents a Dark Pool for Latent Liquidity and Aggregated Inquiry, ensuring Capital Efficiency."
    },
    "keywords": [
        "Block Trading",
        "Central Limit Order Book",
        "Dark Pool",
        "Dark Pools",
        "Double Volume Caps",
        "European Equity Markets",
        "Execution Strategy",
        "Large-in-Scale",
        "Limit Order Book",
        "Liquidity Fragmentation",
        "Lit Markets",
        "Market Impact",
        "Market Microstructure",
        "MiFID II",
        "Order Book",
        "Order Flow",
        "Price Improvement",
        "Regulatory Arbitrage",
        "Request for Quote",
        "Systematic Internalisers",
        "Transaction Cost Analysis",
        "Volume Caps"
    ]
}
```

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                "text": "The SI framework offered several distinct advantages over both lit markets and capped dark pools, making it the strategically optimal destination for displaced block volume. These advantages stem from its unique regulatory classification as a bilateral trading arrangement. The table below outlines the key structural differences that drove the strategic preference for SIs post-MiFID II."
            }
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                "text": "When an SI executes a client's block order, it takes the other side of the trade onto its own book. The SI becomes the principal counterparty. This introduces risk, which the SI must manage. The method of risk management determines the quality of the SI's service."
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```


---

**Original URL:** https://options.greeks.live/question/to-what-extent-did-systematic-internalisers-absorb-block-trading-volume-after-mifid-ii/
