STOCK MARKET WATCH -- Tuesday, 23 April 2013

[Demeter]

8. U.S. stock exchanges call for new rules on "dark pools"

http://www.reuters.com/article/2013/04/16/us-regulation-exchanges-darkpools-idUSBRE93F0VI20130416

The chief executives of three major U.S. stock exchanges have called on regulators to take steps to reduce trading taking place away from public exchanges, saying the opaque practice is hurting market quality...

NOT TO MENTION THE LACK OF REGULATION AND THE LOSS OF PROFIT MARGINS....

...The exchanges made the case that higher off-exchange trading volumes are hurting market quality by creating wider trading spreads and increased intraday volatility, according to a copy of their presentation copied in the filing.

The meetings highlight a growing sense of urgency at the exchanges about the increasing amount of trading by-passing their venues and going instead to so-called dark pools and internalizers. Dark pools are trading platforms where buyers and sellers of stocks remain anonymous and their orders are hidden until they are executed. Internalizers are brokers that match orders within their own firms, allowing them to avoid exchange fees.

The exchanges have long argued that the rise of off-exchange trading distorts prices in the public markets and makes the markets in general less transparent. The exchanges pointed to rules in Canada implemented in October that require dark pools to offer meaningful improvement on the prices quoted on the public markets, or to require a minimum size threshold for off-exchange orders. The result has been a 25 percent decline in the quoted spread and a 17 percent decline in volatility, based on Canadian market data, the exchanges said. MORE

BTW: Off-exchange venues, not including electronic communication networks, made up 38 percent of U.S. trading volume in February, according to data from research firm Tabb Group...There are around 50 dark pools in the United States and 13 public exchanges. Some of the largest U.S. dark pools are run by banks that are also some of the exchanges' largest customers. They include Credit Suisse Group AG's (MLPN.P) CrossFinder, Morgan Stanley's (MS.N) MS Pool and Citigroup Inc's (C.N) Citi Match.