Exchanges: Dark pool growth hurts investors

Exchanges share their woes with Senate
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Officials from NYSE Euronext and Nasdaq OMX Group told U.S. lawmakers that too much trading occurs in dark pools and it's harming investors.

These charges are far from surprising as these exchanges have seen their share of American equity markets squeezed by venues that sprang up in the mid-2000s.

While proponents say dark pools spur competition and help investors trade more easily and without affecting prices, exchanges say regulators have let the venues grow too freely without rules for fair access and equal treatment of participants.

"As a result of this advantage, large broker-dealers continue to move more order flow into their own private trading venues for a 'first look' before routing on to the lit public markets," Joseph Mecane, head of U.S. equities at NYSE Euronext, said in written testimony. "We've seen two markets evolve -- the lit, public, regulated and accessible market versus the dark, selective and private non-transparent market."

He adds that the NYSE, Nasdaq Stock Market and other public venues compete with dark pools and brokers that "are able to employ different practices than exchanges with far less oversight and disclosure."

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