Dark Pools

[winston]

Liquidnet is the largest operator in Asia by volume

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Expands Dark Pool to Japan, Access to Other Dark Venues.

Sept. 14 (Bloomberg) -- Investment Technology Group Inc. expanded a dark pool to Japanese securities as customers in the region seek new ways to trade equities.


Dark pools are private venues that don't publicly display bids and offers. The firm also offers access through algorithms or trading strategies to five other venues, that match orders for Japanese securities without showing quotations.

ITG says about 1 percent to 2 percent of trading in Asia occurs through dark pools, compared to 12.1 percent in the U.S. in June and 2.7 percent in Europe.

http://www.sfgate.com/cgi-bin/article.c ... BJDO6I.DTL

[winston]

Investors Flee Dark Pools

Market volatility pushed stock trading away from private trading venues again last month, as huge market fluctuations turned public, or ”lit”, exchanges into the more attractive trading option.

Private stocks venues, known as “dark pools,” lost market share for a second straight month in September, according to data released Monday by Rosenblatt Securities.

That’s true even though overall trading in the markets surged, due to frenetic buying and selling by worried investors.

Dark pools saw the smallest overall share since June 2010, according to the data. Their share of the trading market fell to 10.7% of U.S. equity volume in September, down from 11.2% a month earlier and 12.08% in the year-ago period.

The declining “dark pool” volumes come as exchanges like NYSE Euronext’s platforms and competitor Nasdaq OMX Group have seen a few months of strong trading activity amid concerns about U.S. economic growth and Europe’s sovereign-debt crisis.

All 18 of the dark pools tracked in the Rosenblatt analysis saw lower month-over-month volume as a percentage of market share.

The trend has shown up in brokerage and trading-firm earnings reports like those of Interactive Brokers Group Inc. and Knight Capital Group Inc., each of which showed strong volumes in their quarterly reports.

Dark pools’ smaller slice of the trading pie underscores how investors react in a difficult market, often turning to “lit” venues that they consider more reliable during volatile times.

“The reduction in dark market share was not surprising given its historical negative correlation with volatility,” wrote Justin Schack, managing director at Rosenblatt Securities.

http://www.yolohub.com/trading/investor ... dark-pools

[winston]

SFC mulls 'dark pool' plunge by Karen Ha

The Securities and Futures Commission is considering whether to regulate "dark pool" trading this year, even though it conceded that the development of such platforms in the territory is a challenge.

Chief executive Ashley Alder noted that the situation of Hong Kong Exchanges and Clearing (0388), being the only stock trading platform operator in the SAR, is not conducive to the growth of dark pool trading.

Also, the current system is not fast enough to facilitate such trades, Alder said. Dark pools are private trading platforms that do not show bids and offers publicly, making them attractive to mutual fund operators and large investors.

Currently, retail investors account for 25 percent of total investors in Hong Kong and they "need the protection of regulatory bodies," Alder said. But he stressed that product diversity in various kinds of trading platforms is also needed in the market.

"Our regulatory responses to what is happening [on dark pool trading] will have an impact from the same regulations taking place in the United States and Europe," Alder said. "I believe we will have a roughly harmonized approach."

But there are difficulties in getting information outside the bourse, he hinted.

So far, the SFC has issued 15 licenses for dark pool trading, which account for 2 percent of total turnover of the bourse.


http://www.thestandard.com.hk/news_deta ... 20509&fc=4

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The Singapore bourse operator said on Thursday its dark pool joint venture Chi-East, will unwind its operations over the next two weeks as business volumes were weak and unlikely to improve.

Source: Reuters

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U.S. 'dark pool' trades up 50%By Philip Stafford , FT.com

(CNN) -- Trading of US equities on "dark pools" has grown by almost a half in the past three years to account for nearly a third of total market volume, according to research that underscores the challenge facing international regulators.

The shift from transparent public exchanges has highlighted growing concern among asset managers and global regulators about off-exchange trading, where prices are reported only after deals are executed.

Such venues allow investors to trade large blocks of shares anonymously, with prices posted publicly only after trades are done.

They have grown popular with asset managers as they minimise the risk of the market moving against them when executing a large order, or of seeing their order sliced up by high-frequency traders.

However authorities in the US, Europe and Australia are considering tighter regulation of such alternative trading venues amid fears that they could further fragment trading and dent the integrity of public markets.

A survey by the London-based CFA Institute found that trading of US equities on dark pools had risen 48 per cent since the start of 2009 to account for about 31 per cent of total consolidated volume, as of March. The CFA used data from Nasdaq OMX, as it collates the vast majority of equities trading data in the US.

Rhodri Preece, director of capital markets policy at the CFA and author of the report, estimated that there was a similar proportion in Europe. "The results suggest that dark trading does not harm market quality at its current levels but the gains are not indefinite," he said. "If the majority of order flow is filled away from pre-trade transparent markets, investors could withdraw quotes because of the reduced likelihood of those orders being filled.It would be prudent for authorities to monitor these developments closely," he said.

The study calculated that about 18 per cent of total volumes of trades were executed on broker-dealers' own trading desks -- a process known in the industry as "internalisation". That figure included virtually all retail orders, Mr Preece said.

Other block-trading venues, whether independent or bank-owned, accounted for 8-13 per cent of consolidated volume, the CFA said.

It called on broker-dealers to provide significant price improvement offer better prices for retail orders that are internalised, or route the order to public exchanges, so it could be executed against the order book. Mr Preece said such moves would help to uphold market integrity.

"It would thus minimise any disincentive to post displayed limit orders and would uphold market integrity," said Mr Preece.

The CFA called on regulators to monitor the growth in the proportion of dark volume trading and improve the reporting and disclosure around the operations of dark pools.

Last week, an annual survey by Tabb Group, the US capital markets consultancy, highlighted growing industry worries about market quality, shrinking commissions and widespread restructuring among broker-dealers.

http://edition.cnn.com/2012/11/19/busin ... index.html

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Dark pool operator Liquidnet's trades in Asia exceeded $5 billion in the first quarter, representing a 20 percent increase from the previous quarter, with investors shifting back into stocks from bonds, said Asia-Pacific head Lee Porter, adding Hong Kong was the largest market in Asia.

Source: Reuters

[winston]

The Truth About "Dark Pool" Trading By Shah Gilani

Well, this ought to be interesting - not for what might be revealed, but for what will likely remain in the shadows.

One of the weakest, least effective regulatory bodies around, the Financial Industry Regulatory Authority (FINRA), is now saying they want to shed some light on "dark pools."

FINRA is the self-regulatory body, backed and stacked by the broker-dealers and brokerages that channel your trades from your desktops and through brokers, whom FINRA is responsible for registering and regulating, to various exchanges for execution.

They're going to be looking into dark pools, which are off-exchange trading venues where stocks are traded "blindly." That's supposed to mean buyers and sellers don't know who's who.

But the truth is, even dark pool customers are blind to how these shadow operators really operate.

Here's the deal...

http://moneymorning.com/2013/06/11/the- ... l-trading/

[winston]

Dark Pools of Liquidity Are a Big Problem for Free Markets By Greg Madison

Source: Money Morning

http://moneymorning.com/2013/07/16/dark ... e-markets/

[winston]

Goldman set to relaunch Hong Kong dark pool by Michelle Price

Goldman Sachs is set to relaunch its Hong Kong dark pool after the bank was forced to halt trading on the venue in 2009, Financial News has learnt.

The development comes amid a broader regulatory review of dark pool licenses in the Hong Kong market.


http://www.efinancialnews.com/story/201 ... ol-sigma-x