The recent spat between Credit Suisse and NYSE Euronext generated headlines , as the heavyweights of broker-owned dark pools and exchange companies went toe-to-toe at a Congressional hearing.
It's a classic after-school fight. A bunch of seniors, namely the old guard stock exchanges, are telling lawmakers that dark pools are hurting the economy and taking away business. On the other side, a group of freshman dark pools from the investment firms say they provide much needed liquidity to a fractured market.
While it's not an outright ban on the use of dark pools, the Council of the European Union is curbing some practices within the off-exchange markets.
The CEOs of three of the top U.S. exchanges met with regulators in Washington DC today to vent their concerns with the increase in the use of dark pools, the secretive venues for trading that take place away from public exchanges.
Fairly or not, dark pools have been cast as the "bad guys" in some quarters of the market structure universe.
Amid declining trading volumes, dark pools have managed to boost their share of overall trade executions, even as the dark vs. lit service divide gets fuzzier by the day.
As MarketBeat points out, UBS executive Dan Mathisson shocked the industry when he pronounced during a recent Congressional hearing that dark pool volume had been stagnant for years. This broke with the conventional wisdom that dark pool volume had steadily been growing as a percentage of all equity volume.
An oft-overlooked fact in the great dark pool debate is that both formal exchanges as well as big broker dealers offer trading in the dark.
I often wonder: If the men and women who created the first dark pool could go back in time, would they take a little extra time to think of a better name than 'dark pools?'
Dark pools have taken their hits in the court of public opinion as of late. And many think the SEC will take a closer look at these liquidity centers as part of a larger review of our overall market structure sometime this year.