Broker-dealer Goldman Sachs has announced that, starting June 2009, it will report all volumes traded in its SIGMA X dark pool on a single-counted basis rather than counting each side of a trade separately.
The move follows industry calls for more transparent dark pool trade reporting in the US equities market. Dark pools report their trades to consolidated trade feeds, but only show up as over-the-counter (OTC) trades, and it is not clear from the feeds whether the trades were executed in a dark pool, and if so which one.
While some dark pools publish their trading statistics, there is no consistency in methodology. Some pools count the two sides of a trade separately – so-called double-counting – or count trades that were sent to the pool but not matched there.
“I am concerned that this state of affairs may not promote public confidence in the equity markets,” said James Brigagliano, co-acting director, division of trading and markets at the US Securities and Exchange Commission in his opening address to the 2009 SIFMA Market Structure Conference on 20 May. He added, “Uniform and reliable trade reporting practices could help establish a fairer playing field because those dark pools that report their volume accurately would not be disadvantaged in comparison with any that might inflate their volume.”
In a letter to clients detailing Goldman Sachs’ intention to single-count trade volumes in SIGMA X, Greg Tusar, managing director of Goldman Sachs Electronic Trading, acknowledged the challenges of understanding where trades had taken place and gave his support to suggestions of more disclosure and standardised reporting.
“More specifically, we support the reporting of ‘single-counted’ and ‘matched only’ volume as a standard, similar to what exchanges have followed for some time,” he said. “We believe these suggestions will go a long way to increase transparency, confidence in our industry, and the understanding of our complex market structure.”
On Goldman’s decision to move to single-counting, Tusar added, “It is our hope that the industry will adopt a similar reporting practice as soon as practically possible.”