The Committee of European Securities Regulators (CESR), the body charged with harmonising rule implementation across the continent’s financial regulators, expects to present its findings on non-displayed trading to the European Commission in the coming weeks.
However, the committee does not expect any dark pool legislation to be proposed separately from the EC’s overall review of MiFID, which will take place throughout this year.
National regulators, including the UK’s Financial Services Authority (FSA), Germany’s BaFin and France’s Autorité des Marchés Financiers, were asked by CESR to collate figures on the level of dark trading in their respective markets. A source that participated in the FSA’s research said in December that dark trading in Europe was unlikely to exceed 4% of total trading volumes.
A CESR spokesperson told theTRADEnews.com that it has now collected all the data and expects to present its findings to the European Commission in the coming weeks after quality and validity checks.
“If the numbers show a large enough portion of trading in Europe is done in dark pools, it may lead to future obligations around transparency,” said the CESR spokesperson. “However, everything we find is expected to feed into the European Commission’s review of MiFID, which is due to start in the near future.”
As a result, CESR does not expect to publish any guidance or figures relating to the data before it has been handed to the commission.
Dark trading in Europe has become a bone of contention since trade body the Federation of European Securities Exchanges claimed last year that 38% of trading takes place over-the-counter, with a substantial portion conducted in brokers’ internal dark pools.
In the Q4 issue of The TRADE, Carlo Comporti, secretary general at CESR, said that if dark trading was found to reach such levels, the European Commission would be likely to act to protect market transparency.
“Where there are a large amount of trades executed outside markets that do not interact with the normal price formation process, the overall efficiency of the market would be at risk,” said Comporti.
Since the claims, several brokers, including Credit Suisse and Citi, have started to provide historical data on their internal dark pool activity, while Nomura has reclassified its NX dark pool as a multilateral trading facility, requiring it to publish prices immediately after a trade is completed and open its platform to other market participants.