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ITG Joins Dark Pool Disclosure Debate With Push for Transparency

May 1 (Bloomberg) -- Investment Technology Group Inc., operator of one of the oldest U.S. dark pools, is pulling back the curtain on its private venue.

The New York-based firm is posting to its website the normally private regulatory filing that explains how its Posit dark pool operates, Chief Executive Officer Bob Gasser said on an earnings call today. ITG will also provide a plain-English guide to how the platform works.

“We hope that these materials will help educate our clients about how we work on their behalf,” Gasser said, according to a transcript of his remarks. “We welcome dialogue with our clients, regulators and other market participants, and believe that a thoughtful, data-driven approach is the best way to tackle problems in an increasingly complex market structure.”

ITG joins IEX Group Inc., which put its Form ATS on its website in October just before it opened for business, in revealing the details of its platform. Dark pools generally keep their operations secret. Among the details featured on a Form ATS are how requests to trade are prioritized, the types of orders available, price structure and ways to access the market.

Concern about dark pools were amplified after the publication of Michael Lewis’s best-selling “Flash Boys,” which portrayed an equities market where exchanges, broker-dealers and high-frequency traders are conspiring to cheat investors. The book’s impact, together with a series of federal and state probes, has heightened scrutiny of Wall Street, especially in areas such as high-frequency trading and alternative venues.

Market Probes

In March the New York Attorney General began a broad investigation into the U.S. stock market, while the Federal Bureau of Investigation is examining some high-speed strategies and the Securities and Exchange Commission is in the midst of an “intensive review of all the issues” according to its chair, Mary Jo White.

Fidelity Investments said on April 10 that it is talking to other investors about starting a trading venue, with the aim of giving customers more information on how orders are handled.

ITG also provides customers with a real-time look at where their orders are being sent by its computers. That service, called ITG Algorithm Prism, started in June. Roughly 33 million shares changed hands each day on Posit in the first quarter. Total daily volume in the U.S. averaged 6.9 billion over the same period.

Ahead of the call, ITG reported earnings of 37 cents per share and total revenue of $137.6 million. EPS beat the average analyst estimate while revenue trailed. The stock was down 3.6 percent at $19.90 as of 11:05 a.m. in New York.

To contact the reporter on this story: Sam Mamudi in New York at smamudi@bloomberg.net

To contact the editors responsible for this story: Nick Baker at nbaker7@bloomberg.net Chris Nagi, Michael P. Regan

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