Now represents the last chance for buy-side investors to lobby Brussels to fight proposals that could crimp their ability to cross block trades in dark pools. While the rules would only govern pools operating in Europe, they have global implications.

Various proposals are under consideration to bring pre- and post-trade transparency to all asset classes, under a review of the second incarnation of the Markets in Financial Instruments Directive (Mifid II).

In June, European Union members proposed introducing caps on equity trading in dark pools, which would become regulated entities called organised trading facilities (OTFs).

The caps would be set at 4% of trading volume in a single stock within one dark venue, and 8% of aggregate volume in a single name across all dark venues.

EU states agreed that if traders exceeded these limits, investors would have to direct their orders (or the amount exceeding the cap) to publically lit exchanges.

The European Council, European Commission and European Parliament are deliberating the final text of Mifid II, with market players speculating that agreement may be reached by the end of this year, with the deadline for compliance expected to be early 2015.

“The onus is on institutional investors to protect, and in some cases lobby in favour of, market infrastructure, [in this case] dark liquidity, where we are able to cross large transactions to the benefit of our clients,” says Christophe Roupie, global head of trading and securities financing for Axa Investment Managers based in Paris.

Market fragmentation due to the proliferation of trading venues, both lit and unlit, has driven regulators to look at pre- and post-trade transparency across asset types.

Buy-side investors have long found managing execution impact difficult, particularly when trading liquidity has dried up. Order sizes on traditional lit exchanges have been getting smaller, which has led institutions and fund houses to turn to dark venues to cross large block orders with minimal market impact.

As Roupie notes: “In an environment where the average transaction size for European equities has shrunk to a few thousand euros, the ability to trade blocks or large orders with low or no market impact is critical.”

The average transaction pales by comparison with a European institution’s size of trades, which can run into tens of millions of euros.

If asset owners such as pension funds and sovereign wealth funds as well as fund houses are compelled to return to lit markets, their ability to cross large block trades could be impaired.

The understanding is it will be their end-sponsors – such as pension savers and taxpayers – who could ultimately suffer from a cost perspective, in that they could lose out on price enhancement from trading within the narrower bid/ask spreads offered by dark venues.

Other than equities, MiFid II has also imposed pre- and post-trade transparency requirements on bonds and structured finance products.

Roupie is an executive committee member of Cassiopeia Committee, a French working group set up in 2010 to reform the corporate bond market in Europe and backed by former French finance minister Christine Lagarde, who is now managing director of the International Monetary Fund.