Goldman Sachs, Morgan Stanley and UBS said this morning that they have agreed to share their "dark pools," the trading arenas used by institutional investors seeking to trade large blocks of stocks without alerting the broader market about such moves. All of the major investment banks operate dark pools, with Goldman Sachs widely thought to be the industry leader.
Dark pools have been criticized as sapping transparency from the market, perhaps making pricing less efficient and certainly creating more uncertainty about the actual volume of shares trading hands. Large trading orders are broken into smaller pieces and matched to other orders by computers. Traditionally this has been done internally within each individual bank. Under the plan announced today, Goldman, UBS and Morgan Stanley will allow for the secretive trading to take place between their clients. The pools are Goldman's Sigma X, Morgan Stanley's MS POOL and UBS's PIN ATS.
The move threatens to take business away from the public stock exchanges and furthers consolidation in the brokerage industry, as the large investment banks with many clients are obviously best positioned to employ dark pools. Dark pools now account for some 10 percent of equities trading in the United States, and more than 20% of all trades in New York Stock Exchange-listed stocks.
Goldman, UBS and Morgan Stanley agree on dark pools [Reuters]
Posted by onetwo , May 20, 2008 9:25AM
ooooohhhhh "dark mysterious pools of capital"...the end is nigh!...repent you sourcerers of commerce!
In all seriousness, this is probably not what the banks should be doing, given the heavy hands that are about to bitch slap the industry. Anything with even the appearence of secrecy or impropriety will only fuel the fire of increased regulation. I don't agree with that sentiment, but i don't think right now is quite the time for the b/ds to start yelling "dont look over here...nothing to see."