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 discovery.
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.