Oct. 2 (Bloomberg) -- ICAP Plc, the world’s largest broker of trades between banks, will open a dark pool for about 6,000 European stocks Oct. 12 as it steps up competition with traditional exchanges.

London-based ICAP’s BlockCross, an alternative trading system and so-called dark pool for stocks, will start operating with 12 to 15 participants, Daemon Bear, head of BlockCross, said in an interview today. The system, created specifically to trade large blocks of stocks, aims to sign 75 members by the end of the year and is open to both funds and brokers, said Bear, who was previously head of equity trading at JPMorgan Chase & Co.’s asset management unit.

ICAP said in December it was setting up BlockCross, joining a host of alternative systems seeking to compete with exchanges including NYSE Euronext, London Stock Exchange Group Plc and Nasdaq OMX Group Inc. The European Union’s Markets in Financial Instruments Directive, which came into effect Nov. 1, 2007, encouraged competition between bourses and multilateral trading facilities such as Chi-X Europe Ltd. Institutional investors have increasingly turned to dark pools, which match orders anonymously and don’t publicly disseminate quotes.

“Mifid had been introduced and there was a natural fragmentation that was going to occur as more venues you could execute on came into being,” Bear said today. “If you look at what happened in the U.S. there’s an opportunity for block crossing and we believe that.” He declined to comment on targets or market share.

Stocks Only

BlockCross doesn’t plan to offer anything but stocks, or a visible order book, Bear said. Clearing and settlement, or post- trade services, will be handled by ICAP Securities Ltd. The system will offer all the biggest stocks in Europe, except for Spanish and Greek equities which will start later.

Traditional exchanges, which have lost about 25 percent of market share to MTFs, are trying to fight off new rivals partly by introducing dark pools themselves or buying the alternative systems. LSE is in negotiations to buy Turquoise, owned by the biggest banks.

Chi-X, Europe’s largest alternative trading system, and Turquoise run dark pools, with both also offering a service that provides a single access point to multiple dark pools. Liquidnet Holdings Inc. and Nyfix Inc., electronic brokerages that operate dark pools, are both doing business in London. Big banks also operate this type of system for their own clients. NYSE Euronext runs the SmartPool block trading system.

‘Successful Products’

“It’s a competitive space,” Bear said. “We’ve been able to learn from some of the successful products and improve on them. We haven’t tried to recreate the wheel.”

As trading on dark pools has increased, regulators have also grown more interested. The European Commission plans to examine dark pool share trading and the U.S. Securities and Exchange Commission has said it may require more disclosure on dark-pool trading.

“A review of all trading venues is very fair,” Bear said. “ It’s clearly something that’s being looked at globally. I’m quite relaxed about the benefits these products bring. The value they add to the industry as a whole will be there to see.”

To contact the reporter on this story: Nandini Sukumar in London at nsukumar@bloomberg.net

Last Updated: October 2, 2009 11:36 EDT