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ASX Dark Pool Trades at Record as Bourse Seeks More Rules

Centre Point, the dark pool owned by ASX Ltd., reported record trading in August, with A$2.7 billion ($2.84 billion) worth of shares changing hands even as Australia’s main bourse operator sought greater regulation.

The venue, which allows investors to trade anonymously away from the main exchange, had a 3 percent share of cash-equity turnover totaling A$90.8 billion in August, ASX said. Centre Point saw more than a million transactions in the same month that the bourse operator warned regulators about the dangers of platforms which do not display prices. Chi-X Australia Pty, the only competitor to ASX for public cash-equities trading, hosted turnover of A$3.3 billion in August, according to data compiled by Bloomberg.

Off-exchange trades, if not properly regulated, threaten the integrity of Australia’s securities market because of its small size, ASX said on Aug. 6 in response to an Australian Securities & Investment Commission consultation on market structure. ASX lost its monopoly as Australia’s only public, or lit, venue in October last year with the entry of Nomura Holdings Inc.’s Chi-X Australia.

“In August, we saw record volumes traded on Centre Point,” said David Raper, general manager of trade execution and information services at ASX. “Centre Point has delivered more than A$85 million in meaningful price improvement and it’s a positive sign that the new services are continuing to increase liquidity for our customers.”

In March, 16.4 percent of trading went through dark pools, according to statistics from regulator ASIC, with an additional 13.2 percent trading in blocks of larger than A$1 million away from the exchange. In Hong Kong, trades through dark pools amounted to 1.5 percent of total turnover in the year through February 2012, the city’s Securities and Futures Commission said in its annual report.

Bigger Share

Centre Point offers anonymous matching of orders at the mid-price of the bid-offer spread that’s available in the public, or lit, market. The venue’s block trading platform, which started in June, allows users to specify a minimum acceptable fill size and a so-called sweep function that will send orders to Centre Point to check for price improvement before routing to the main market, ASX TradeMatch.

Liquidnet, a dark-pool operator which only allows investment companies, not brokers or trading firms, to use its platform said the company’s market share has grown rapidly this year in Australia. As ASX cash-equity volume has fallen 18 percent year to date, Liquidnet’s has grown 33 percent, Lee Porter, head of Liquidnet Asia Pacific, said in an interview.

“Australia’s always been a blocky upstairs market,” Porter said. “It’s always been estimated that 25-30 percent of the market has been done off exchange then printed back to it so it’s just been done in different ways and sliced up.”

ASIC’s consultation on draft market structure rules, which include regulations on algorithms and high-frequency trading, closed for comment September 14.

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