(Corrects first and sixth paragraphs of story published yesterday to lower Bank of America’s ranking after the bank said it miscalculated its volume and Finra corrected its list.)
Credit Suisse Group AG (CSGN), Barclays Plc and UBS AG (UBSN) were the largest dark pools in the Financial Industry Regulatory Authority’s first weekly report meant to make the private trading systems more transparent.
The Wall Street regulator created the repository to reveal how much U.S. equity volume is handled on alternative trading systems including dark pools. The private platforms have won market share from the public exchanges, which now only handle about 60 percent of volume, and drawn scorn from critics including author Michael Lewis, whose “Flash Boys” argues that broker-dealers use dark pools to rip off investors.
“Any time there’s a significant portion of the marketplace that’s opaque, there are people who are concerned because they don’t understand exactly what’s happening,” Steven Joachim, the industry-funded brokerage regulator’s executive vice president for transparency services, said in a phone interview today. “This is a portion of shedding light on the activity levels by ATSes and the amount of activity these dark pools are doing today.”
Under the new initiative, the public will be able to see on Finra’s website the total shares traded each week in each ATS or dark pool. Information made public today is from reports filed for the week of May 12-18, Finra said. Before the regulator’s move to make the information public, volume on alternative trading systems was publicized by market research firms using data provided voluntarily by brokerages.
The first batch of data only accounts for stocks in the Standard & Poor’s 500 Index, Russell 1000 Index and some exchange-traded products. Trading activity for all other securities will start being released in two weeks.
Today’s figures show the largest dark pool for the week of May 12 in the selected stocks was Credit Suisse’s Crossfinder, which handled 374 million shares. It was followed by Barclays’s LX at 305 million, UBS’s dark pool at 278 million, and Bank of America Corp. (BAC)’s Instinct X at 214 million.
Finra is also reporting where individual stocks are traded. For example, today’s data shows that about 20 million shares of Regions Financial Corp. were traded on alternative trading systems in the week of May 12, 3.5 million of which were on Bank of America’s platform, while 2.18 million shares changed hands on UBS’s dark pool. About 1.87 million shares were bought and sold on Crossfinder.
“This allows investors to make good, solid decisions,” Joachim said. “Investors usually like to move to markets where there’s the most liquidity, and this provides them with information on the liquidity in different stock issues. It gives them better information to go to market and make higher-quality decisions.”
Joachim added that Finra is talking to the U.S. Securities and Exchange Commission about expanding the reports beyond registered ATSes to other off-exchange venues.
To contact the editors responsible for this story: Nick Baker at firstname.lastname@example.org Chris Nagi