Dark Pools Survive Brexit, Mostly
On tumultuous trading days, market participants want execution first and foremost. Reducing friction and information leakage is nice, but a less-than-perfect execution is better than no execution, especially if no execution means having to hold something for the weekend.
So it’s not surprising to hear exchanges had a better day than dark pools on Friday, after the Brexit vote.
At the end of European trading, the market traded approximately 127.7 billion euros of notional value, which 151% greater than the past five-day average of 50.7 billion euros, according to market data supplied by registered investment exchange Bats Europe. Of that volume, approximately 93% traded on the displayed market.
London-based trading began without Morgan Stanley’s MS Pool in operation, reported Bloomberg. Although it did return to trading later in the day.
The global news corporation also reported that outside liquidity providers weren’t able to access Deutsche Bank’s SuperX dark pool, for at least part of the day.
Stateside, US cash equities trading open normally but the Dow Jones Industrial Average almost immediately dropped roughly 445 points from an opening high of 17,946.63 within the first 30 minutes of trading. The Chicago Board Options Exchange’s S&P 500 Volatility Index beginning at 20.6 and hitting an intra-day low of 19.86 before reaching a mid-day high of 26.24 at press time.
“All of our markets opened smoothly and are operating normally amid heavy volume,” said a NYSE spokesperson. “We are maintaining open lines of communication to address any customer needs and will continue to provide any updates in real time.”
However, equities trader notice that some of the same dark liquidity pool issues had followed the sun.
Deutsche Bank extended its restriction on outside liquidity providers accessing the bank’s SuperX trading platform to the US market later in the day, according to sources on The Street. The bank did not return calls for confirmation by press time.
When asked for confirmation that Bank of America Merrill Lynch had been restricting access to its MXLN broker-crossing network during Friday’s trading, company spokesperson Selina Morris declined to comment.
Rumors of Morgan Stanley’s MS Pool ending trading 10 minutes before the market close and KCG’s Acknowledge EQ and MatchIT platforms going down, proved to be unfounded according to spokespeople from both firms.
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