29 June 2009

Dark pool pricing set to tumble as Bats Europe enters fray

Bats Europe is to enter the increasingly crowded dark pool market in August with an aggressively priced system that will reward participants that add order volume whilst charging to remove liquidity in the dark.

 

 

Bats Europe is to enter the increasingly crowded dark pool market in August with an aggressively priced system that will reward participants that add order volume whilst charging to remove liquidity in the dark.

 

Bats Europe participants will be able to send orders to the dark pool using existing FIX handlers with orders hidden and executed at a midpoint reference price. Advanced features for orders, such as setting a minimum execution quantity, will be included in the dark pool offering.

 

The launch of the Bats dark pool will raise the number of off-exchange trading venues in Europe to 13, further squeezing margins for participants chasing scarce liquidity.

 

Precise details of Bats pricing structure will be unveiled closer to launch says CEO Mark Hemsley, who believes the company can make a mark by trading rebates for order volume.

 

"We believe the costs for participants to send orders to other dark pools are unnecessarily high," he says. "We will reward participants that add liquidity to our dark pool via a rebate pricing structure since they create the opportunity for liquidity removers to benefit from price improvement."

 

The proliferation of dark pools has attracted the attention of European and US regulators, who are concerned about the impact of such systems on market transparency.

 

Hemsley says Bats is currently reviewing the provision of its dark pool with the Financial Services Authority and anticipates availability for testing in July.

 

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