ASX breaks down dark trading stats
The Australian Securities Exchange (ASX) has clarified dark pool
trading statistics first revealed in a submission to regulators calling for
stricter off-exchange trading regulation.
In the submission to a market structure consultation held by Australian Securities and Investment
Commission (ASIC), the Australian bourse claimed the proportion of dark trading
averaged 25% in the first half of 2012 – even reaching 43% on one day – which
risked draining liquidity from the lit market.
In a statement sent to theTRADEnews.com breaking down the figures,
the ASX said its average figure of 25% comprised 11% OTC trading, with the
remaining 14% coming from dark pools, broker internalisation mechanisms and its anonymous execution service Centre Point.
Greater detail on the figures cited by ASX follows unease among
brokers regarding the data, with some claiming it gives a distorted view of
dark pool trading in Australia.
ASIC also gave its take on the dark pool market, with figures
showing total off-exchange trading reached 29.4% in March, made up of dark
block trades (off-exchange trades over A$1 million, which accounted for 13.2%), dark trades on
ASX Centre Point (2.3%), independent dark pools (4.5%) and brokers’
internalisation engines (9.4%).
The 43% figure was recorded on 21 June and was the result of an expiry date in all Australian equity index derivatives.
The ASX submission to ASIC on market integrity rules claimed there
was strong evidence internationally that too much dark trading would result in
widening spreads, higher costs to investors and had a negative impact on price
The submission urged the regulator put in place a range of
measures - including a $25,000 dark order minimum and regulating dark orders below
block trade sizes as done on the lit market - quickly, instead of an
incremental approach, to protect the Australian cash equity market.
The potential row brewing over the proportion of dark trading in
Australia bears similarity to a debate in Europe sparked by the Federation of European Securities Exchanges (FESE) in 2009.
FESE claimed that of European trading was transacted away from
public markets, with most conducted in broker crossing networks. Some market
participants said at the time that FESE used the figure to substantiate calls
for tougher regulation on broker crossing networks. In July, broker dark pools
accounted for just over half of the €58.5 billion trading in dark pools,
representing a 4.2% share of overall trading activity.