The US Securities Exchange Commission is to work with the Federal Bureau of Investigation to explore whether dark liquidity pools and algo trading are causing abuses of the market.
 

Last year the SEC established a Quantitative Analytics unit to investigate potential market abuses and the working practices of off-exchange trading venues.

The emergence of off-exchange trading driven by complex computing systems in ‘dark liquidity pools’ alongside the advent of high frequency trading (algo trading) has led to concern about market transparency and fair competition.

IOSCO, (the International Organisation of Securities Commissions) says: “Technology has led to the emergence of new sources of liquidity, Alternative Trading Systems (ATS’) in the US and Canada, and multilateral trading facilities (MTFs) in Europe, and brokers’ internal crossing networks (which are not ordinarily regulated as trading venues) as well as lit and dark liquidity.”
 

Dark liquidity – pools – are trading venues which are invariably a place for institutional investors. How these operate and who gets best execution or information is somewhat of amyster. “Are they leading to endemic unfairness in the market?” is among the questions being asked.
 

The latest edition of Focus magazine examines the current state of technology in the global capital markets. 
The cover feature: Capital markets technology: Too far too fast? asks is more regulation coming? 
Is this a threat to existing technology investments?
Are suppliers and exchanges following the right strategies. We also provide a perspective on the most high profile algo trading crashes.

Read the digital edition now.