Investment Banks to Report European Dark-Pool Trades

Discussion in 'Wall St. News' started by Optionpro007, May 24, 2010.

  1. Investment Banks to Report European Dark-Pool Trades (Update2)
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    By Nandini Sukumar

    May 24 (Bloomberg) -- Six investment banks including UBS AG, Citigroup Inc. and Deutsche Bank AG agreed to give regulators a daily count of how many shares are changing hands on internal stock-trading systems known as dark pools.

    Starting today, the banks, which also include Morgan Stanley, JPMorgan Cazenove Ltd. and Credit Suisse Group AG, will report European equity trades matched in their internal crossing engines to Markit Ltd. At the end of the trading day, Markit will collate, check and validate the data and publish the aggregated trading volume the next afternoon, the Association for Financial Markets in Europe, which represents the banks, said today.

    Dark pools, electronic trading venues that don’t display bids or offer quotes publicly, have drawn scrutiny from regulators in Europe and the U.S. who say they may limit market transparency. The platforms are designed to allow the largest investors to buy and sell shares without giving speculators an advantage by revealing their identities.

    “People want to know what really goes on in the dark books,” George Andreadis, Credit Suisse’s head of liquidity strategy for Europe, said by phone. “We had questions from regulators asking how much is going on and the FSA too, so we thought it was about time we gave consistent data, not just a snapshot.” Credit Suisse’s CrossFinder dark pool is the largest in the U.S.

    OTC Trades

    In Europe, the Markets in Financial Instruments Directive has made reporting of over-the-counter trades mandatory. The banks had previously reported OTC trades without specifying which had taken place on their dark pools.

    Regulators disagree on how much trading banks carry out in dark pools. The U.K.’s Financial Services Authority says the pools account for 1.25 percent of trades, whereas the Federation of European Securities Exchanges, which represents exchanges, estimates the figure is closer to 40 percent. The lack of reliable information on volumes and pricing of securities in dark pools has posed a problem for regulators trying to keep pace with market innovation.

    Brokers such as Credit Suisse and Goldman Sachs Group Inc. operate dark pools for their clients, as do European bourses including London Stock Exchange Group Plc, NYSE Euronext and Deutsche Boerse AG. Alternative trading systems such as Chi- X Europe Ltd. and Bats Europe and the London-based units of electronic crossing networks Investment Technology Group Inc. and Liquidnet Holdings Inc. also have their own dark pools.

    ‘Further Transparency’

    “This initiative is designed to bring further transparency into this area of OTC trading,” said John Serocold, managing director of AFME. The move provides “verified data where previously there has been only speculation and by giving a clear indication of the actual levels of trading in crossing engines.”

    Volumes will be published on an aggregated basis and will be broken down by country, Markit said today. During testing the daily percentage of trades reported was between 0.62 percent and 1.02 percent of total European trading.

    On May 21, 219.8 million euros ($273 million) of U.K. equities changed hands on the dark pools of the six banks, along with 86.8 million euros of German stocks, according to Markit data released today.

    Trading on dark pools will likely rise to 7 percent of the total in “major” European markets this year, according to Tabb Group LLC.

    On April 13, the Committee of European Securities Regulators, the European Union’s top securities supervisor, called for tougher rules for disclosing post-trade data. The European Commission is reviewing the requirement as part of its overhaul of Mifid, which came into force in November 2007. The commission may propose rules on dark pools and high frequency trading later this year as part of the review.

    To contact the reporters on this story: Nandini Sukumar in London at
    Last Updated: May 24, 2010 12:39 EDT
  2. they just pickin on those innocent hft hard woiken souls.

    if they couldn't rape and pillage the order flow, imagine the kind of work they'd have to do.

    already enough barrista's at bux