Dark pool figures show growing global demand despite controversy

Despite increasing political pressure, dark pool trading was stronger than ever in 2015.

Dark pools have continued to see record trading volumes in 2015, with regulatory proposals to curb the practice failing to prompt any early withdrawal by the buy-side.

Figures released separately by ITG and Liquidnet, both of which operate dark pools in Europe, indicate that demand for trading in the dark remains strong.

Research by ITG found that, between December 2014 and December 2015, the value traded in dark multilateral trading facilities in Europe increased by 45%, while volume grew by 25%.

Liquidnet also announced recording trading volumes on its institutional-focused dark pool, with trades in 2015 worth a total of over $133 billion, up 9.9% compared to 2014.

The firm also managed to set daily, weekly, monthly and quarterly trading records in October. It saw a record day on 15 October with $1.12 billion of principal traded, its record week traded $4.08 billion while October as a whole saw $15.9 billion traded, up 28% on its previous record month.

Further confirmation of the strong demand for dark trading was also seen in London Stock Exchange Group’s latest trading statement, where its Turquoise MidPoint dark order book saw volume grow by 22.9% and value up 26.7% for 2015 as a whole.

The strong figures come despite political pressure on dark trading in both the US and Europe. In the US, a number of legal cases have been brought against US dark pool operators for misleading investors. In Europe, upcoming caps on dark trading as part of Mifid II are also expected to severely limit the practice outside of those trades that qualify for the large-in-scale waiver.

Rob Boardman, CEO of ITG Europe, said: “We’ve seen over the past couple of years a lot more of the lower-tier brokers, particularly in continental Europe, become more sophisticated in the way they route their orders. In the past they might have been happy to simply route to the primary exchange, but today they’re increasingly using technology to route to other venues to meet best execution obligations.”

“There is a lot of demand for dark trading as the numbers show. Even with the upcoming caps in Mifid II, the market will find solutions to continue dark trading because it is proven to lower market impact and provide better execution.”