Dark pool trading grows faster than traditional markets
Published 15/01/2016 | 02:30
Stock trading grew faster in European dark pools last year than it did on public exchanges, signalling that a regulatory campaign to clamp down on the practice is struggling to change behaviour.
The region's dark pools - venues that don't display prices before trades take place - enjoyed a 45pc jump in the value of trading they handled in 2015, according to broker and equity-market operator Investment Technology Group (ITG). Public exchanges saw a 28pc increase.
Dark venues are expanding more quickly than their "lit" counterparts, even though the European Union is planning to impose tough restrictions on them. EU institutions are concerned that public markets will become less efficient and share prices less accurate if dark pools grab a sizable share of equity trading. At the same time, US regulators have fined several dark venues, including ITG, for rule breaking.
"It's a continuation of a trend that we've seen since these platforms launched," said Rob Boardman, chief executive officer of ITG's European arm. "The buy-side finds significant value in dark liquidity, and we expect that this demand will continue." ITG's data doesn't include bank-run pools known as broker-crossing networks, which match trades between the bank's customers.
EU regulations will eventually require banks to phase out these pools or convert them into regulated platforms.
The data capture activity on European equity trading venues called multilateral-trading facilities, or MTFs.
Dark trading on MTFs increased to 6.6pc of the overall European stock market in 2015 from 5.7pc in the previous year, according to data from Fidessa Group Plc.