NYSE Euronext Takes 'Dark Pool' Complaints To SEC
By Jacob Bunge, Of DOW JONES NEWSWIRES
CHICAGO -(Dow Jones)- NYSE Euronext (NYX) took its case against dark pools to the Securities and Exchange Commission Friday, charging that competitors are giving preferential treatment to some customers and introducing price distortions to the market.
In a letter to SEC Secretary Elizabeth Murphy, the operator of the New York Stock Exchange alleged that new order types developed by Nasdaq OMX Group (NDAQ) and BATS Exchange could hurt the investing public, and urged tougher oversight for private pools of liquidity.
"Nasdaq, BATS, and alternative trading systems are providing non-public order information to a select class of market participants at the expense of a free and open market system," said NYSE Euronext spokesman Ray Pellecchia.
Representatives of Nasdaq OMX and BATS Exchange weren't available for comment.
At issue are new order types that route customers' stock trades through so- called dark pools, private electronic markets where large blocks of shares are traded anonymously in an effort to get a better price than is available on the open market.
Critics argue that, as a greater amount of stock trades are executed away from public markets, exchange-listed stock prices become a less accurate gauge of market sentiment.
In its letter, NYSE Euronext said that routing stock orders through dark pools also delays execution and makes it harder for authorities to track market activity. About one-fifth of average daily stock volume is now transacted through dark pools, also known as alternative trading systems. Routing orders through these venues is seen as a way for exchanges to win back business as they battle for market share in U.S. equities.
As dark pools draw more equities-trading business, incumbent exchanges also have sought to compete directly. Nasdaq OMX this month launched Neuro Dark, a European dark pool, while NYSE Euronext earlier this year introduced the New York Block Exchange with broker-dealer BIDS Holdings LP, as well as the SmartPool platform in Europe.
-By Jacob Bunge, Dow Jones Newswires; |
