The T Word – 20 January 2010
First Published Wednesday, 20th January 2010 03:06 pm from Fidessa : Fidessa
The opinions expressed by this blogger and those providing comments are theirs alone, this does not reflect the opinion of Automated Trader or any employee thereof. Automated Trader is not responsible for the accuracy of any of the information supplied by this article.
href="http://www.finextra.com/fullfeature.asp?id=1231"
target="_blank">Andrew Bowley's video interview on
Finextra regarding the launch of
href="http://www.nomura.com/europe/resources/upload/NX-Press-Release.pdf"
target="_blank">Nomura's dark pool - NX. It helped
crystallise the love/hate relationship between dark pools and the
T word - Transparency.
Andrew Bowley made a good point about how the pursuit of
MTF status for NX had been going on for a long time and
wasn't just a knee jerk reaction to the increasing
regulatory pressure on the dark pool phenomenon. He also talked
about how greater transparency was a good form of advertising for
his brand and would help attract customers. This would seem to be
the case, too, for Instinet's dark pool - title="Instinet's BlockMatch"
href="http://www.instinet.com/includes/index.jsp?thePage=/ExecutionStrategies/alternative.html"
target="_blank">BlockMatch - which went down a
similar MTF route. Other dark pool operators don't
quite share Andrew's view on transparency although this
is a function of their diversity rather than any attempt to be
necessarily opaque. On both sides of the Atlantic there is a wide
array of activities being labelled dark pools, all of them
offering different services aimed at different market sectors. In
the US, for example, dark pools operated by
href="http://www.getcollc.com/index.php/getco/tertiary/execution_services/"
href="http://www.knight.com/ourOfferings/knightLink.asp"
target="_blank">Knight are market maker dark pools
where the pool operator is always taking the other side of the
href="http://www.liquidnet.com/"
target="_blank">Liquidnet, are buy-side only
crossing networks. In yet another category are the venue operated
href="http://www.chi-x.com/products/chi-vision-smart-liquidity-consolidation.asp"
target="_blank">Chi-Vision or the
target="_blank">LSE's Turquoise (nee
Baikal) that offer aggregation services by providing dark SOR
connectivity to other dark pools. And, finally, there are the
broker-owned dark pools such as
target="_blank">SigmaX (Goldman Sachs) and title="Credit Suisse Crossfinder"
href="https://www.credit-suisse.com/news/en/media_release.jsp?ns=41337"
target="_blank">Crossfinder (Credit Suisse). This is
what is causing the regulators such a headache as it's
impossible to regulate effectively in such a diverse
environment.
This is all part of a wider
transparency issue in Europe that revolves around the lack of
agreed standards for pre- and post-trade market data. I have
commented a few times that an industry derived solution would be
better than anything imposed from above. This, however, requires
that industry players adopt a grown-up approach and collaborate
when perhaps their instinct is to try and compete. With this in
mind, it was interesting to read the
href="http://thomsonreuters.com/content/financial/pdf/cross_asset/mifid_whitepaper"
target="_blank">European Data Consolidation paper
sent to me by Andrew Allwright at Thomson Reuters. While it
naturally has a Reuters sales bias it does succinctly highlight
the issues and make a number of sensible recommendations that
could form the basis of a long term solution. I'm not
sure that all the proposals outlined will work in practice but
this is a community problem and I believe we should be working
together to resolve it. Naturally it will require some
discussions about the detail.
Anyway, this
seems like a good time for another "ask the
audience" moment.
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