Dark Pool Of Liquidity
Dark pool of liquidity is a private electronic trading network created by
institutional orders by major banks and securities companies that are
unavailable to the public. In the United States there are over 40 dark pools in
operation that work alongside 13 public exchanges. Over the years, exchanges
have raised concerns about dark pools, arguing that the continued flow of trades
to the opaque trading venues could be a disadvantage to the overall markets and
retail investors. Block trades facilitated away from the central exchanges
represent the bulk of dark pool liquidity. Traders involved in dark pool
liquidity are referred to as dark pool operators. Dark pools range from
completely opaque to semi-transparent. Order flow can range from transient to
stationary with manipulation more readily available, as the transparency of the
liquidity pool increases. Depending on availability, pricing and client
preference, dark pool operators have the ability to route orders through either
an exchange or through their own private network. Buyers and sellers are matched
by bid and ask price however, since the entire transaction is done within
control of the bank, prices are not published to the exchanges and the identity
of the buyer or seller are not publicly disclosed. Securities and Exchange
Commission officials are meeting with top executives of the three largest U.S.
stock exchange operators to have restrictions placed on dark pool operators.
According to representatives from the three exchanges the meeting with the SEC
involves NYSE Euronext (NYX), Nasdaq OMX Group (NDAQ) and BATS Global Markets.
Off-exchange trading in shares has increased dramatically in 2013 increasing
pressure on the exchanges. Reportedly during Q1 2013, nearly 36% of all daily
stock trades have occurred in private markets, such as dark pools. Institutional
investors have been migrating large block order flows to dark pools to avoid
negative price impact that comes with trading in the public markets.
The European Commission, the EU’s antitrust watchdog is investigating MasterCard
Inc. (MA), in a fresh probe into fees and practices. The investigation stems
from concerns that some of MasterCard’s interbank fees were anti-competitive.
MasterCard said in a statement Tuesday that it would “fully cooperate” with
regulators and that it “always aims to balance the interests of both consumers
and retailers.” Three main areas the EU is reviewing include payments made by
foreign card holders such as U.S. tourists when visiting Europe. “When a U.S.
tourist uses a MasterCard to make purchase in the European Economic Area, these
fees can be quite high, generally much higher than those paid in Europe,” Mr.
Colombani explained. The EEA includes all 27 EU countries as well as Iceland,
Liechtenstein and Norway. MasterCard’s restrictions on merchants who wish to use
banks outside their own country, which could be cheaper are also being reviewed
by regulators. Interchange fees - fees paid by the merchant bank to the
cardholder bank - largely determine prices paid by merchants for accepting
MasterCard payment cards and these can vary widely - for example: in the
Netherlands a transaction of 50 euros ($65.04) would incur a 10-cent fee while
transactions in Poland would incur an 80-cent fee. MasterCard’s honor-all-cards
rule - that requires a merchant to accept all types of MasterCard cards - is
also under investigation by the EU. MasterCard is appealing for the second time,
a probe from the commission which banned the company’s interbank fees within the
EU in 2007. Antoine Colombani, an EU commission spokesman told reporters in
Brussels, “This new investigation is in order to make sure consumers are not
harmed. We are concerned that some of MasterCard’s fees may be
anti-competitive.” The EU commission intends to propose a regulation on
interbank fees for card payments to provide more legal certainty as well as to
keep the playing field level for providers across the EU, the commission said.
National Federation of Independent Business March small-business optimism index
fell 1.3 points to 89.5. NFIB index made up of responses of 759 randomly sampled
small businesses. The biggest fall in the index came from a 5-point slide in
"expect real sales higher" followed by 4-point slides in both "plans to increase
employment" and "plans to increase inventories."
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April 9, 2013