Finra Makes Dark Pool Data Public to Help Boost Transparency

Jun 02, 2014 4:05 pm ET

(Updates with Joachim comments in second and final paragraphs and details of data from fifth paragraph.)

June 2 (Bloomberg) -- The Financial Industry Regulatory Authority has begun providing data indicating activity levels in all alternative trading systems, including dark pools, as part of an effort to boost transparency and investor confidence.

“Any time there’s a significant portion of the marketplace that’s opaque, there are people who are concerned because they don’t understand exactly what’s happening,” Steven Joachim, the industry-funded brokerage regulator’s executive vice president for transparency services, said in a phone interview today. “This is a portion of shedding light on the activity levels by ATSes and the amount of activity these dark pools are doing today.”

Under the new initiative, the public will be able to see on Finra’s website the total shares traded each week in each alternative trading system or dark pool. Such systems account for a significant percentage of total over-the-counter trading in exchange-listed equities in the U.S., Finra said.

Information made public today is from reports filed for the week of May 12-18, Finra said. Before the regulator’s move to make the information public, alternative trading system volume was publicized by market research firms using data provided voluntarily by brokerages.

Trade Reports

The first batch of data only accounts for stocks in the Standard & Poor’s 500 Index, Russell 1000 Index and some exchange-traded products. Trading activity for all other securities will start being released in two weeks.

Today’s figures show the largest dark pool for the week of May 12 in the selected stocks was Bank of America Corp.’s Instinct X, which handled 428 million shares on 2.18 million trades. Credit Suisse Group AG’s Crossfinder saw 374 million in volume and 2.18 million transactions, while Barclays Plc’s LX venue reported 305 million shares and 1.7 million trades.

Finra is also reporting where individual stocks are traded. For example, today’s data shows that about 20 million shares of Regions Financial Corp. were traded on alternative trading systems in the week of May 12, 3.5 million of which were on Bank of America’s platform, while 2.18 million shares changed hands on UBS AG’s dark pool. About 1.87 million shares were bought and sold on Crossfinder.

“This allows investors to make good, solid decisions,” Joachim said. “Investors usually like to move to markets where there’s the most liquidity, and this provides them with information on the liquidity in different stock issues. It gives them better information to go to market and make higher-quality decisions.”

Joachim added that Finra is talking to the U.S. Securities and Exchange Commission about expanding the reports beyond registered ATSes to other off-exchange venues.