Nice to see that BATS Europe has announced that it, too,

is going to

href="http://www.batstrading.co.uk/resources/press_releases/BATS_Europe_Dark_Pool_FINAL.pdf"

target="_blank">launch a dark pool service. While

not too surprising, it is interesting to note that they will be

offering a maker taker pricing model as this will be sure to

extend the current price war into the dark arena as

well.

BATS joins a long list including Chi-X,

Turquoise, NYFIX Euro Millennium, SmartPool, Pipeline, NEURO Dark

and, of course, Baikal, that will all offer traders different

destinations for their dark order flow. If you add to this the

pools operated by the major banks such as Goldman Sachs, Credit

Suisse, UBS and Bank of America Merrill Lynch, then the choice

becomes truly bewildering.

In the headlong

rush to launch these initiatives I wonder whether the firms in

question have stopped to consider how the trading community

really wants to use this type of facility. The issue seems to be

complicated by the fact that the term "dark pool" is being used

to describe an ever-widening array of platforms and activities

that stretch the original concept (a block crossing facility that

minimises information leakage) almost completely out of shape.

This point seems to have been picked up by the regulators, too,

as both the SEC and the FSA are concerned about their collective

impact on investor protection and market transparency.

In any event, trading firms will need to find new ways

to navigate intelligently across all these pools and seek the

most appropriate liquidity in each. This will inevitably require

further technology investment for those firms that wish to

maintain complete control over where they route their order flow

to. This is where the offerings from Baikal and Turquoise have a

potential advantage as they are providing a Liquidity Aggregation

Service which is similar in concept to the "compare the market"

style insurance web sites that we hear so much about. Baikal and

Turquoise are also good examples of how the trading landscape is

reshaping itself. The traditional clear-cut distinctions between

buy-side, sell-side and exchanges are increasingly being replaced

by more murky concepts such as senders of flow, routers of flow

and end destinations. In some cases, participants are acting in

multiple categories and so the distinction between brokers and

venues is becoming increasingly blurred.

On a

different note, I was invited by the folks at Carnegie to

participate at an event last week that examined fragmentation in

the Nordic region. The ensuing debate between OMX and Burgundy

was respectful but highlighted the different propositions of the

traditional exchanges versus new, lower cost MTFs. It was also

interesting to meet many of Carnegie's customers and discuss the

impact of fragmentation on their stock at first hand. Many thanks

to John Lauritsen and his team for their professionalism and

hospitality in staging a very thought-provoking event.