A Shot in the Dark – 26 May 2010
First Published Wednesday, 26th May 2010 02:05 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.
This week saw the announcement that
href="http://www.finextra.com/News/Fullstory.aspx?newsitemid=21417"
target="_blank">six brokers are going to publish their dark
pool volumes in a bid to improve transparency of
non-lit trading in Europe. The report is published by Markit and
href="http://www.markit.com/en/products/data/boat/bcs-reports-listing.page"
target="_blank">here. Whilst the six firms involved
should be applauded for taking these first steps towards greater
transparency, the announcement still leaves a few questions
unanswered. Firstly, not all the big boys are playing - notable
href="http://www2.goldmansachs.com/" target="_blank">Goldman
Sachs and it will be interesting to see what happens to
the figures if and when it decides to play too.
Also, the published numbers represent only a fraction of
the total non-lit volumes being reported across dark MTFs, OTC
trades and Systematic Internalisers. Take the
target="_blank">FTSE 100, for example. Last month
66% of its constituents were traded on various lit venues
href="http://fragmentation.fidessa.com/stats/exchange/LSE.html"
href="http://fragmentation.fidessa.com/stats/exchange/CIX.html"
href="http://fragmentation.fidessa.com/stats/exchange/BTE.html"
target="_blank">BATS Europe etc. The remainder was
split across registered dark MTFs such as
href="http://www.chi-x.com/products/chi-delta-non-displayed-book.asp"
href="http://www.nomura.com/europe/services/equities/liquid_markets/nx.shtml"
target="_blank">Nomura NX, bilateral OTC trading and
Systematic Internalisers. Just to be absolutely clear, however,
nobody is suggesting that a third of the
href="http://fragmentation.fidessa.com/fragulator/?fim=.UKX"
target="_blank">FTSE 100 last month was traded on
broker dark pools but what is certain is that it wasn't
traded on lit venues either. While the new
href="http://www.markit.com/en/products/data/boat/bcs-reports-listing.page"
target="_blank">Markit report provides some useful
additional data, the only way to get a completely accurate figure
href="http://www.markit.com/en/products/data/boat/bcs-reports-listing.page"
target="_blank">Markit numbers from the OTC and SI
reports, add back in the registered dark MTFs and then make a
guess as to what is missing.
Another point
that was made to me is that it is still not possible to get an
accurate, independent figure for broker dark pool trading in a
particular stock or index as the
href="http://www.markit.com/en/products/data/boat/bcs-reports-listing.page"
target="_blank">Markit report only provides a
combined number of some broker dark pool trades in each country
in Europe.
href="http://www.markit.com/en/products/data/boat/bcs-reports-listing.page"
target="_blank">Markit can only publish the
information they are given but, until the industry as a whole
unites behind a common methodology and approach, it looks like we
will remain somewhat in the dark about the dark.
