By Michael Kitchen
LOS ANGELES (MarketWatch) -- The Securities & Exchange Commission has
launched an investigation into communications between some stock exchanges
and high-frequency trading firms, looking for any collusion to...
By Jean Eaglesham, Jenny Strasburg and Scott Patterson
U.S. securities regulators are conducting a wide-ranging investigation into
the complex relationships between rapid-fire trading firms and stock
exchanges, according to the official...
By Silla Brush,
The U.S. Commodity Futures Trading Commission may seek comment before July
on ways to test and supervise automated and high-frequency trading systems,
said Gary Gensler, the agency's chairman.
By Carla Main,
Britain's Serious Fraud Office, which prosecutes corporate bribery, uses
too many secret settlements in foreign corruption cases, the Organization
for Economic Cooperation and Development said.
The SFO is using...
Opening Statement of Commissioner Bart Chilton to the CFTC Technology
Advisory Committee, Washington, DC
Thanks to Commissioner O'Malia for his leadership of the Technology
Advisory Committee (TAC). He and his staff...
The debate over high-frequency trading continues to rumble on, but one
European broker-dealer believes that opinions are changing and the region’s
politicians will now face a tougher task in introducing...
By Benjamin Lanka,
Revenues not rising as fast as costs
FORT WAYNE – Rising yields and crop prices mean more revenue for farmers,
but they also mean higher taxes.
Farmers across Allen County...
BROKERS, DARK POOLS DRIVE OFF-EXCHANGE GROWTH, SAYS TABB
By REINHARDT KRAUSE
Brokerages that execute internal trades and so called "dark pools" — off-exchange venues favored by institutional investors — are driving the explosion in U.S. stock trading away from exchanges, says Tabb Group.
In March, a record 37% of U.S. equities trading was executed away from the NYSE-Euronext (NYX), Nasdaq OMX Group (NDAQ) and other traditional exchanges, says Tabb Group, a markets consulting firm.
The trading desks of brokerages, which match stock orders internally before they're sent to exchanges or dark pools, accounted for an estimated 24% of trades in March. That's up from 9% in 2008, says Tabb Group. Dark pools executed 13% of trades in March, up from 6% in 2008, says Tabb Group.
Dark pools such as privately held Liquidnet and BIDS Holdings enable institutional investors to buy or sell large blocks of stocks while keeping pre-trade price and volume concealed.
"Thirty-seven percent of equity trading being executed outside the exchange framework is enormous," said Larry Tabb and analyst Cheyenne Morgan, who co-authored a report.
"Dark pools and internalization engines are becoming more sophisticated," they added. "Increasingly, not only are dark pools sending messages to other dark pools, but trading desks are increasingly connecting to liquidity providers and giving them notice of incoming flow."
In a phone interview, Morgan said NYSE, Nasdaq, and BATS Global Markets "should all be concerned about this. They're the ones who are losing out here."
BATS cancelled its initial public offering last month following a trading breakdown on the morning the stock debuted.
Morgan says both the internal trading desks of brokerages and dark pools engage in high-frequency trading — moving in and out of stocks at superfast speeds using powerful computers and software algorithms.
Regulators stepped up scrutiny of HFT following the "flash crash" of May 6, 2010 when U.S. markets nose-dived by almost 10% in several minutes.
HFT has been a factor in driving some retail investors from equity markets, some analysts say. On some days, HFT accounts for more than half of market trading, according to one study.
To slow things down, the SEC may force high frequency firms to pay for canceled trades, which account for the bulk of orders.
According to an IBISWorld study, revenue for HFT firms will reach $28.1 billion in 2012, growing 11.6% on average since 2007.
Critics argue that private exchanges reduce the information public markets use to set stock prices and make volume-reporting less transparent. Morgan says regulators have been slow to take action.
"The big picture is that a lot of this has been put on hold," Morgan added. "We haven't seen much since the Pipeline issue."
The SEC last year fined dark pool firm Pipeline Trading Systems and two executives $1.2 million. It has been renamed Aritas Securities.
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