Dark Pools

[winston]

The Dark Pools are coming ...

Investment Technology Opens Dark Pool in Hong Kong (Update1) By Nina Mehta

March 17 (Bloomberg) -- Investment Technology Group Inc. is expanding its Posit Marketplace private trading platform into Hong Kong stocks starting today, said Clare Rowsell, head of client relationship management in Asia for the firm.

Executions will take place at the midpoint of the best bid and offer on the Hong Kong Stock Exchange. The New York-based broker will expand Posit Marketplace to Australian stocks in the second quarter and in Japan stocks later this year. ITG traded 1.9 percent of U.S. equities last month.

“Finding liquidity is a challenge for the buyside in Asia,” said Rowsell of ITG Hong Kong. ITG is starting the initiative in Hong Kong because client demand for the private venues has been strongest there, she said.

Dark pools, trading platforms that execute stock without displaying prices, are developing in Asia for brokers and institutions seeking to transact without going to public stock exchanges. There are about 40 dark pools in the U.S.

More than 100 clients will have access to Posit Marketplace in the early stages of the system, according to Rowsell. These include regional firms in Asia, global brokers with Hong Kong trading desks, and other clients outside the region executing Asian securities.

ITG has had a crossing system in Hong Kong that matches buy and sell orders at specific times. Posit Marketplace will allow continuous matches of buy and sell interest throughout the day. It will also route orders to dark pools operated by other brokers. Rowsell declined to name those venues.

Seeking Liquidity

“Asia is in the early stages of what the U.S. and Europe have gone through in terms of the fragmentation of markets and trading venues,” Rowsell said. The ability to access dark venues through an algorithm benefits investors searching for liquidity, she added.

Trading costs for institutional investors are two-thirds higher in Asia than in the U.S., Rowsell said. The cost averaged 96 basis points in Asia in the fourth quarter, according to ITG data.

ITG’s Posit dark pool accounts for one-third of the broker’s trading in the U.S. and “roughly” a third in Europe, Rowsell said. She declined to estimate how much volume in Hong Kong stocks Posit Marketplace might execute by the end of the year.

Electronic trading in Asia is increasing. Last year, 18 percent of equities trading in Asia took place electronically, according to research firm Greenwich Associates in Stamford, Connecticut. The firm said it would rise to 28 percent by 2012.

http://www.businessweek.com/news/2010-0 ... ate1-.html

[millionairemind]

Electronic trading in Asia is increasing. Last year, 18 percent of equities trading in Asia took place electronically, according to research firm Greenwich Associates in Stamford, Connecticut. The firm said it would rise to 28 percent by 2012.

http://www.businessweek.com/news/2010-0 ... ate1-.html

I am surprised that only 18% of equities trading in Asia takes place electronically. Kind of on a low side...

[winston]

Plunge into dark pool is set

Thursday, June 10, 2010

Tora Trading Services, a San Francisco-based financial services provider, plans to offer "dark pool" stock trades in Hong Kong by the end of this month.

Dark pools - trading platforms that execute stock deals without displaying prices - are developing in Asia for brokers and institutions looking outside public exchanges.

Tora, in which Goldman Sachs has a minority stake, started offering Crosspoint in Japan in February.

Its first dark pool, Crosspoint, is claimed to process shares worth more than US$1.5 billion (HK$11.7 billion) daily.

"By the end of this month, we're going to start to cross Hong Kong securities as well," chief executive officer Robert Dykes said in Tokyo yesterday.

"Towards the end of the third quarter or early fourth quarter, we're even going to launch in Singapore or Australia."

Tora's move underscores the growing demand among investors for speedier and cheaper trading.

Electronic trading accounted for 18 percent of Asia's equity transactions in 2009, according to researcher Greenwich Associates.

It is expected to rise to 28 percent in the next three years.

Ronald Arculli, chairman of Hong Kong Exchanges & Clearing, said in December that trading systems such as dark pools pose systemic risk to financial markets because of a lack of transparency.

The platforms also increase price volatility, according to Arculli.

Source: BLOOMBERG

[winston]

DJ Hong Kong Mulls Disclosing Dark Pool Stock Trade Volume - Report

HONG KONG (Dow Jones)--The Hong Kong stock exchange is considering disclosing the volume of dark-pool transactions on the local stock market to the public, Mingpao Daily reported Thursday citing Eric Yip, head of the cash market department at bourse operator Hong Kong Exchanges & Clearing Ltd. (0388.HK).

The paper cited Yip as saying Hong Kong Exchanges will ask dark-pool operators to start submitting transaction reports regularly in the coming months, so that it has a clearer picture of the volume of transactions conducted by dark pools.

The report said the operator is studying whether to disclose the volume on a daily, weekly or monthly basis, but it is unlikely to disclose the sources of the transactions.

Yip's comment came after Tora Holdings said June 2 it will expand its dark-pool aggregator, Tora Crosspoint, to Hong Kong later this month.

Dark pools are alternative trading platforms that allow buyers and sellers to place orders anonymously. Aggregators give traders access to various dark pools through a single point, allowing them to 'sweep' each dark pool to see which one might offer the best price for a particular stock, all in milliseconds.

Newspaper website: http://www.mingpaonews.com

Source: Dow Jones Newswires

[winston]

HK

Balanced rules seen on dark pools trade by Katherine Ng, The Standard HK
Monday, July 12, 2010

Details of so-called "dark pool" transactions may be kept out of the public eye although firms handling such deals must report to Hong Kong Exchanges and Clearing (0388).

This comes amid calls for more transparency, prompting the Securities and Futures Commission and HKEx to spend months studying if details of such transactions should be disclosed.

A dark pool is an electronic trading platform that lets investors to anonymously trade large amounts of stocks without having to reveal their identities and trading volume on open-order books.

"The government noted that the market has a need to trade in anonymity but at the same time a balance is required so as not to undermine the market and affect liquidity," an informed source said.

A HKEx spokeswoman confirmed that it plans to ask all dark pool operators to submit transaction reports. "But whether the reports will be made public is still being studied," she said.

Under the Securities and Futures Ordinance, dark pool operators in Hong Kong have to register as automated trading services providers and must submit net transaction volumes to HKEx as part of over-the- counter transactions.

Twelve dark pools operate in Hong Kong and their transactions account for about 3 percent of market turnover.

The government noted earlier that local stocks were highly volatile due to OTC activity, and asked the SFC to see if more transparency is needed.

"Even the United States is aware that fast crossing engines [dark pools] have fragmented markets and liquidity after the Dow Jones plunged 1,000 points on May 6," a source said.

But the source added: "The government also noted the market's need for anonymity and therefore may allow trading volumes and investors' identities to be kept a secret."

Last month, shares of Tencent (0700) and China Sci-Technology (0985) plunged 17 percent in two weeks and 40 percent in one day, respectively, due to OTC trading. There was no proof of dark pool involvement, but the high volatility was seen as a warning signal, market participants said.

Goldman Sachs, meanwhile, confirmed it stopped its dark pool SIGMA- X business in December.


http://www.thestandard.com.hk/news_deta ... 00712&fc=1

[winston]

Singapore OKs Dark-Pool Deal BY P.R. VENKAT

SINGAPORE—A joint venture between Singapore Exchange Ltd. and Chi-X Global Inc. received approval from the Monetary Authority of Singapore to operate what is known as a dark pool, further expanding the role of alternative trading platforms in the Asian-Pacific region.

Trading in the dark pool is expected to begin in the fourth quarter, according to a statement from Chi-East, a joint venture between SGX and Chi-X Global. Chi-X is a unit of Nomura Holdings Inc. of Japan.

Source: Wall Street Journal

[winston]

UPDATE 1-SGX's Chi-East starts "dark pool" operations

* To start with Singapore, HK and Japan-listed shares
* Will provide post-trade price and volume transparency

SINGAPORE, Nov 11 (Reuters) - Chi-East, the "dark pool" joint venture between Nomura's (8604.T) Chi-X and Singapore Exchange (SGXL.SI), said on Thursday it has started providing a platform for brokers to trade large blocks of shares.

"Chi-East will begin with Singapore, Hong Kong and Japanese shares before moving to other Asian markets such as Australia," a Chi-East spokeswoman said.

Dark pools, so named because they represent large pools of "buy" and "sell" orders not visible to regular investors, are relatively new to Asia but operate quite freely and match billions of dollars in stock transactions each day in the West.

Chi-East, which is regulated by the Monetary Authority of Singapore, has, however, committed to providing full post-trade price and volume transparency through data providers.

Brokers that have committed to participating on Chi-East include Instinet, Deutsche Bank (DBKGn.DE), Morgan Stanley (MS.N), Nomura and UBS (UBSN.VX), Chi-East said.

http://www.reuters.com/article/idUSSGE6AA09V20101111

[winston]

DJ HK Exchanges To Require Dark Pool Trades To Be Identified As Such

HONG KONG (Dow Jones)--Hong Kong's alternative liquidity pool operators earlier this month received a letter from Hong Kong Exchanges & Clearing Ltd. (0388.HK) advising them they will have to start reporting their trades using a new transaction code, as the city moves to gather more data on the developing business.

Though operators of dark pools, a type of alternative liquidity pool that doesn't display quotes publicly, already report their trades, the new reporting requirement will segregate their trades from other off-market transactions.

The regulation will take effect Feb. 1. Lorraine Chan, spokeswoman for HK Exchanges, said Tuesday information will be collated and shared with Hong Kong's securities regulator, the Securities and Futures Commission.

Current market estimates indicate dark pools account for 1%-3% of the value of trades in Hong Kong, but the actual size and how fast they are growing are unknown.


Source: Kate O'Keeffe, Dow Jones Newswires

[winston]

Dark pools seen in better light

Japanese equity trades taking place in dark pools - or private systems that don't display prices publicly - is growing, according to data from the Tokyo bourse's alternative share trading platform.

The share of Japanese stocks traded on the Tokyo Stock Exchange Trading Network, or Tostnet, increased to 10 percent last month from 7 percent in March, when regulators first required dark pools to connect to the system.

"The increase in Tostnet's share of trades shows use of dark pools is growing in Japan," said Lee Porter, Hong Kong-based managing director for Liquidnet Holdings' Asian dark pool operations.

"Most of the major broker-dealers have now deployed their dark pools in Japan. You are now seeing the Japanese domestic brokers doing the same too. So, clearly there is appetite."

Japan's Financial Services Agency in March ruled dark pools must register as proprietary trading systems, or connect to financial markets via systems such as Tostnet. Foreign brokers, including Credit Suisse, Citigroup and Morgan Stanley, operate dark pools in Japan, alongside domestic operators like Daiwa Securities.

Tostnet trades accounted for 6.6 percent of domestic share volume at the Tokyo exchange in 2009, and 6.2 percent in 2008, according to bourse data.

The portion of trades handled outside of public exchanges in the Asia-Pacific region is forecast to rise to 5 percent of transactions within three years from about 2 percent this year, said John Feng, New York-based managing director of research company Greenwich Associates.

Tostnet's increased share signals more dark pools exist in Tokyo, Tsuyoshi Masuda, deputy director of the stock-market department at the exchange, said. The exchange's income may fall if more money shifts to dark pools from the auction, as Tostnet's fees are cheaper than those for auction trades.

Tostnet commission is about one-seventh of that charged for regular auction trades. The alternative trading system was launched in 1998 as a venue for block share transactions after regular trading hours.


Source: BLOOMBERG

[winston]

Link below. This guy is trying to write a book. I gave up after page 2 ...

More Trades Taking Place in 'Dark' By Christopher Westfall

(TheStreet) -- Although the average retail investor views the floor of the New York Stock Exchange as the place for buying and selling stocks, in reality trading has exploded in private electronic markets owned and dominated by banks and brokerages like Citigroup (C), Goldman Sachs (GS) and Credit Suisse(CS).

These exchanges are referred to as "dark liquidity" by market pros, denoting the fact that trading takes place outside the public arena. In dark markets, only the buyer and seller know how many shares were traded, when and at what price, as opposed to a publicly displayed "ticker" quote showing a stock's movement.

"Once alternative markets start getting even bigger, regulators are going to start thinking of ways of getting this order flow back into the public markets," says Larry Tabb, founder and CEO of market consulting firm Tabb Group.

"Now that that we have a third of order flow matched in the dark, there is even a greater chance of that happening."


http://www.thestreet.com/story/11020472 ... ooyah_html