The following was from an article on the SMH today. I and others are greately concerned and I can’t see how you can have a level playing field with dark pools, asssuming the reason for the dark pools is confirdentiality.
The function of what some call trading and I call a continuous auction is to establish price. You cannot have trading in two different rooms and maintain proper pressure for price. It starts with an offer to sell then there is an offer to buy when these two meet then there is a sale. This is effected by the number of people who want to buy. By braking this up into more than one process the ultimate price is effected. That has to be fact, based on two seperate hoses out of one tap and pressure drops. Also you can turn off one or the other hose at will. This article in the Herald also says some retail sales are channellled into dark plools. In that event how does the client know the broker gets the best price.
Does anyone know if anyone else is doing research of the type Nev has done in his CDU research blog.
Below is an extract from the Herald today
Layering is known as a high-speed trading strategy where a stockbroker makes and then cancels orders that they never intended to carry out. Speaking at the FINSIA conference in Sydney, Mr Medcraft said the rise of high frequency trading, and the growth of dark pools which are being used by fund managers to buy and sell shares outside public markets, had created new challenges for ASIC.
But he said it was important to keep pace with rapid changes in technology to ensure the market remained fair and efficient for all participants. "Trades have moved from one to two seconds, to milliseconds or microseconds.
High frequency traders using this technology have added to the exponential increase in global order books,'' he said.
"Trade in dark pools are getting smaller and more frequent. We have even seen retail order flow being put into dark pools."
ASIC has proposed mandatory trading system controls to manage the growth of dark pools and high frequency trading. Such controls include ''kill switches'' that instantly cut off computer trading systems in the event of a US-style ''flash crash'', enforced testing of algorithms and volatility controls for some traded items.
"We will track trades in dark pools so we can look at trading behaviour in real time," Mr Medcraft said.
"Our view is that we should have a level playing field: whether it's a dark market or a lit market, essentially the same type of market infrastructure should apply.''
CDU Price at posting:
$4.71 Sentiment: Buy Disclosure: Held