Monday, June 22, 2009

Exposing Dark Pools

The SEC is looking into dark pools to see whether they might be considered a threat to market transparency and is considering regulating them. Chairwoman Mary Schapiro said that a "lack of reliable information can prompt speculation and suspicion about the basis for market fluctuations.” This may be true. But it would be a mistake to over-regulate dark pools. They came about quite naturally - either for trading large blocks without unduly moving the market or for internally crossing a large bank's business. Now dark pools are big business. The banks upsell access to their internal pools, a myriad of independent technology platforms have been launched for dark pools, and dozens of software firms have developed solutions for them. This includes smart order routing to find the best price or volume, and algorithms that find liquidity inside or outside the pools. A large segment of the financial technology business would suffer if dark pools were banned or exposed.
On another note I am off to the SIFMA Technology Management Conference and Exhibition in NYC tomorrow. I am told there are a lot fewer exhibitors this year due to budget concerns. (That will mean less swag, presumably.)But there are some fancy parties: On Tuesday Portware has a cocktail reception at the Blue Fin Bar, Thomson Reuters is hosting a panel discussion and wine tasting, and the ubiquitous SunGard party is at the Empire Hotel rooftop. Wednesday night includes a Fidessa party and KX Systems, which is down in the Gramercy Park area - a nice change from midtown. I will blog all the news from SIFMA on Friday.


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