Concerns raised around preferential matching within dark pools

‘Internal preferencing’ cited as biggest concern with bank-run dark pools, according to poll at TradeTech.

A survey of delegates at TradeTech this week found the biggest concern surrounding bank-run dark pools is the potential for preferential matching.

Over a third of respondents agreed ‘internal preferencing’ is the biggest issue with dark pools, followed by 26% who said lack of evidence and operational structure was the biggest concern.

Financial regulators have clamped down on failures with dark pool operation and management over recent years.

Deutsche Bank was ordered to pay a $37 million by the Securities and Exchange Commission (SEC) in December, following misstatements and omissions related to the marketing of its equities order router.

Similarly in February last year, Credit Suisse and Barclays settled investigations by the SEC into their dark pools by agreeing to pay a combined $154.3 million in fines.

Barclays and Credit Suisse both admitted to making false statements in connections with the marketing of their dark pools and other electronic trading services.

A panel at the conference saw senior electronic traders slam stricter caps on dark pools under MiFID II, having agreed it is one of the most effective methods of trading.

“Any regulation that limits buyers and sellers coming together at an agreed price is wrong for the market place. The volume caps are very arbitrary numbers,” said Ralston Roberts, co-head of electronic trading at Goldman Sachs in Europe.

The survey also found 36% do not believe MiFID II will make markets more efficient, resilient and transparent, while 19% said they were undecided on the regulation’s potential positive impact.

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