European equity trading handled with private markets known as dark pools surged 45 percent during the past two quarters from a year earlier to reach a record, according to Fidessa Group Plc.
The value of stock traded at dark pools tracked by Fidessa totaled 207 billion euros ($281 billion) in the six-month period that ended in September, up from 143 billion euros a year earlier, the data show. The 45 percent increase compares with an only 2 percent gain in the total value of equity changing hands on all European platforms, according to Fidessa, a Woking, England-based developer of financial trading software.
Owners of public exchanges are losing market share to dark pools as traders take refuge from computer-driven firms, which seek to trade in front of the largest investors. NYSE Euronext and Nasdaq OMX Group Inc., owners of American and European stock exchanges, have asked the U.S. Securities and Exchange Commission to consider limits on dark-pool trading.
“The dark is getting darker,” Steve Grob, Fidessa’s global director of group strategy, said in an interview. “Volumes are rising as investors try to avoid information leakage. They also think they can get a better price in the dark rather than on a lit venue.”
In the U.S., the Financial Industry Regulatory Authority issued a proposal requiring private venues including dark pools to release more data, including weekly volume reports and disclosures on how much trading of each stock they handle.
Dark pools, which don’t publish bids or offers on shares, were created to let large investors trade big blocks without having news of their orders move the price.
“With no significant increase in the number of stocks traded in the dark, the growth in value was due to more of the same stocks being traded on dark venues,” Grob said.