The Headhunter

SEC May Force More Disclosure About Dark Pools

The SEC Chairman Mary Schapiro, concerned that trading on private electronic markets may pose “emerging risks,” said the agency may require firms to disclose more information on their transactions, according to a Bloomberg report.

The report covers Schapiro's speech last Friday and states that if trading systems known as “dark pools” expand substantially, they may “prompt speculation and suspicion” about price fluctuations because they don’t provide enough transparency  Traders with access to the private markets’ pending orders also may gain an unfair advantage, she said.

“Given the emerging risks posed by dark pools, the commission will be taking a serious look at what regulatory actions may be warranted,” Schapiro said. She said she’s asked SEC staff to review ways to “best bring light” to dark pools.

Reuters' coverage of the speech cites Seth Merrin, CEO of electronic marketplace Liquidnet. ""If they do something that makes the dark pool light and eliminates the reasons for institutions to trade on our vehicles, that would be a disaster for a hundred million people out there..."

LinkedIn Faring Well in the Battle of Social Networking Sites

An article in this morning's Independent newspaper discusses which social networking web sites are on the up and which ones are struggling.

On the up is LinkedIn which is described as a networking site with a captive audience of business professionals. Users have more than doubled in the past year to 880,000 in the UK. 

The article states that LinkedIn has prospered during the credit crunch in terms of users, partly because those who have lost their jobs see it as a good way to get their CVs in front of potential employers.

Click here to read the article.

LinkedIn's own company profile states:

"LinkedIn takes your professional network online, giving you access to people, jobs and opportunities like never before. Built upon trusted connections and relationships, LinkedIn has established the world’s largest and most powerful professional network. Currently, more than 40 million professionals are on LinkedIn, including executives from all five hundred of the Fortune 500 companies, as well as a wide range of household names in technology, financial services, media, consumer packaged goods, entertainment, and numerous other industries."

Dark Pool Trio Forms European Alliance

The Financial Times reports that Goldman Sachs, Morgan Stanley and UBS yesterday agreed to allow reciprocal access to each other's dark pool block trading facilities for the first time in Europe. This move  comes weeks ahead of the planned launch by the London Stock Exchange of Baikal dark pool.

The article says the move is a sign that some of the big players that operate dark pools are trying to find ways round the increasing fragmentation of share trading liquidity across the region by joining forces in an attempt to aggregate liquidity in one place.

A WSJ article confirms that NASDAQ OMX Europe will launch NEURO Dark on May 11th 2009.

Expert Networks Investorside Panel Summary

Expert Networks were discussed at last week's Investorside conference in New York.

There's a summary of the panel discussion on Integrity Research's blog. The topics covered were client diversification, product diversification and compliance.

Currently Investorside has four member firms who either provide expert networks or primary research intelligence to buy-side firms. These are Coleman Research Group Inc., Gerson Lehrman, OTR Global and S&P owned, Vista Research.

Nasdaq OMX Europe to Launch Own Dark Pool in April

The FT reports this week that Nasdaq OMX Europe is to launch a new pan-European dark pool, Neuro Dark, a reference price system based on best bid and offer prices and will offer similar functionality to that of Nasdaq OMX Europe.

The article says Liquidnet, Nyfix and ITG are the leading independent operators of dark pools in Europe, with operations based in London. The UK’s Financial Services Authority is conducting a routine review of the licenses awarded to dark pools operating on a pan-European basis out of London. It has raised questions over whether so-called “pre-trade transparency waivers” given to some pools are still appropriate.

Recent Announcements from Turquoise, LSE and BATs

A few days after Turquoise announced it has raised new funding from its existing backers to see it through to the end of 2009, the FT reports that the pan-European equities trading facility has announced incentives for traders using its platform in a further sign of the price war in European share trading.

The FT article states that Turquoise will attempt to attract more such traders, sometimes referred to as “electronic liquidity providers”, by raising the rebates it will pay them for posting bids on the Turquoise order book. Click here for the firm's press release.

Last week a Reuters' report said the London Stock Exchange forecast a difficult 2009. The article said that analysts remain cautious on the outlook of the exchange. One analyst citation predicts that MTFs have made in-roads into UK equities trading and they are likely to drive down pricing.

This morning BATS Europe announced a pan-European market share display available free via its public Web site. MarketWatch reports that BATSEurope is the first MTF to provide this data publicly and free of charge. The display provides near real-time notional value and volume summaries for BATS Europe, as well as other major European exchanges and MTFs.

Keeping Track of Dark Pools

Here is a summary of recent dark pool announcements.

This weekend, The Independent on Sunday reported that The London Stock Exchange is in talks with a number of new City investors for Baikal, its pan-European equity trading facility, to replace Lehman Brothers which had been the exchange’s partner until its recent collapse. Here's the article.

Last week Bloomberg reported that ICAP will launch a dark pool for blocked trades called Blockcrossing. The article cites an un-named source that the firm "wants to develop a multilateral trading facility by the second half of 2009".

At the end of November the Financial Times reported that Turquoise, is in talks with "strategic investors" about fresh funding for the venture two months after it was launched to challenge Europe's incumbent stock exchanges. Click here for the full article.

An article in The Wall Street Journal last week published the headline, "In Europe, dark pools remain in the shade". The article talks about the effect of volatility on dark pools as well announcing new European launches. Pipeline Trading Systems, a U.S. dark pool, is moving ahead with its plan to launch a European trading system early next year. Knight Capital Group, a rival U.S. broker, said last week it plans to launch its dark pool in Europe, although timing is unknown.

Social Networking Sites Benefit From Financial Crisis

The IHT ran an interesting article earlier this week about business networking websites.

It says LinkedIn's rate of membership growth has doubled since August this year and the company is now adding a new user every second - or more than two million a month. The number of users working in the financial services industry has increased by 50 percent in the past two months, while those in investment banking have doubled.

Another website, MeetTheBoss is aiming for a niche audience rather than millions of users. Only top-level executives are allowed membership, the site says. The first 20,000 members were invited to join, and other applicants have been selected based on their place of employment, their title and the budget they manage. The article says two-thirds of applicants have been refused, and the list of members will top out at 50,000 to ensure the site does not lose its exclusivity or become too unwieldy.

Baikal In The Press Today

The FT reports that it is unclear who owns the intellectual property associated with LX (Lehman's "LX" algorithmic trading system that was to have been used in Baikal, the LSE/Lehman collaboration). The owner is either Nomura, which bought Lehman's European assets, or Barclays, which ended up with its US business.

The reporter says, "no-one is sure - or will say - whether LX was part of the US or European Lehman operation." and adds, "if Nomura is the winner, a complication could arise. Nomura is the majority owner in Chi-X, an alternative trading platform launched 16 months ago in direct competition with the LSE."

Finextra reported yesterday that the LSE have appointed John Wilson as CEO Baikal.

Today, Financial News says that the LSE is weighing up alternative proposals for Baikal. Click here for their article.

DTCC and LCH.Clearnet Plan Merger

FT.com (subscription) reports that Depository Trust and Clearing Corporation of the US and Europe’s LCH.Clearnet on Wednesday unveiled a merger that would create the world’s largest clearing house.

Under the transaction, DTCC, the largest US clearer, would acquire all of the shares in LCH.Clearnet, Europe’s largest independent clearing house. LCH.Clearnet shareholders would receive up to €10 a share, which gives the European group an equity value of €739m ($950m).

Click here for the press release which outlines user benefits, merger terms and timing.