Citi, Credit Suisse, Deutsche Bank, JP Morgan, Morgan Stanley and UBS have teamed up with Markit to provide daily trading volumes on their automated crossing systems, more commonly known as dark pools.
The data will be publicised the day after trading, and will be broken down country by country.
The data will include trades matched on Citi Match, CS Crossfinder, DBA, JPM-X, MSPool and UBS PIN. Trading volume on these venues ranged from 0.62% to 1.02% of total European trading over the previous two week testing period.
This initiative is designed to bring further transparency into this area of OTC trading by providing verified data where previously there has been only speculation, and by giving a clear indication of the actual levels of trading in crossing engines, says John Serocold of the Association for Financial Markets in Europe.
At the end of each trading day Markit will collate the data from each participating bank, conduct validation checks on the information, and publish the aggregated trading volumes the following afternoon. This data will be freely available on the Markit website.
Trading on dark pools has come under increasing scrutiny from regulators. The Committee of European Securities Regulators recently issued a series of consultation papers in preparation for a revamp of MiFID. The regulator identified a need for improvement, including quality, cost and consolidation of post-trade transparency data and delays in the publication of such data.
One method to increase transparency on these dark pools would be to force the venues to re-register as multi lateral trading venues. MTFs, created by MiFID, require venues to report the volume and price to reporting services; Markit Boat being a primary aggregator of such data.
In December 2009 Nomura became the first to pre-empt possible regulation by re-launching its U.S dark pool as a European MTF.
“One of the major questions now being addressed by European regulatory bodies with regard to MTFs is whether the dark pools that are owned by brokers should be registered as MTFs,” says Phillip Silitschanu, senior analyst with Aite Group and author of a recent report into the European trading landscape. “Brokers argue that registering dark pools this way would expose them to toxic order flow while hindering their ability to provide better pricing. Yet, if they do register as MTFs, the entire European MTF landscape could change dramatically.”