Trading volumes rise in dark pools
Shanny Basar
17 Jul 2007 updated at 17:42
Two new alternative systems set up by investment bank consortiums have reached average daily trading volume of 50 million shares, as traders increasingly seek new nontraditional venues for anonymous execution of block trades.
LeveL is a dark pool alternative trading system created by Citi, Credit Suisse, Fidelity Brokerage, Lehman Brothers and Merrill Lynch launched late last year.
Dark liquidity pools are electronic trading venues that do not quote prices. They match buyers and sellers anonymously, minimizing information leakage and market impact, often with lower direct trading costs.
They have taken off in the US, where they have doubled to more than 40 since the start of last year, according to estimates.
On July 13, LeveL executed 30 million shares.
Jose Marques, director at Credit Suisse, said: "The [alternative trading system] framework continues to provide a powerful solution for those looking to access dark liquidity pools for algorithmic trading."
Bids Trading, the alternative trading system launched in spring by 12 brokerage firms, also including Citi, Credit Suisse, Lehman and Merrill Lynch, executed more than 20 million shares in daily volume twice last week.
Tim Mahoney, chief executive of Bids Trading, said: “This is a significant milestone for us, and one that we are pleased to reach in such a short amount of time.”
In a separate development UBS and Investment Technology Group agreed to give their respective clients algorithmic access to each other's liquidity pools.
UBS clients will be able to access Posit, ITG's dark liquidity pool product, using the bank's liquidity-seeking algorithm, called Tap.
Likewise, ITG clients will be able to access the Swiss bank's liquidity pool, UBS Price Improvement Network or "Pin", via the broker's liquidity aggregator, ITG Dark Algorithm.
Tony Huck, managing director at ITG, said: "As the market becomes more fragmented, we believe providing consolidated access to brokers, electronic communication networks and ATSs is of great value to our clients.”
In the first quarter of this year, Posit average daily volume was 61.1 million shares in the US.
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