Game Over Dark Pools? Here Comes Reg NMS-2

Tyler Durden's picture

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sysin3's picture

I'm too simplistic, but it seems to me that:

1) all bids and offers should be visible to all traders who subscribe to real time quotes

2) all bids and offers should be "real"  for at least a small (human) amount of time (i.e. honored if hit)

3) all trades should be posted to the consolidated tape more or less immediately (we do all computers, don't we ?)

I don't care if you're a better trader than I am (there are plenty of those) ...  I just care about a more or less level trading venue.

Anonymous's picture

Almost stopped HFT? Did I miss something?

Major props to ZH, for sure, but lets not kid ourselves.

Careless Whisper's picture

Props, yes. Pop the Cristal --- not yet dewd, actually I would say not ever, the vampire squid is very resourceful.

jwthomps's picture

I wonder why the government would ever want

things right.  They will need every crook they can

find to aid them in their hidden QE games.


Bonds for worthless CDOs in a place where

none of us can see.

AR's picture

TD and Staff:  Once again, great compliments to you for exposing and bringing important issues and topics like this to the forefront of the mainstream.  Good work in trying to bring fairness and balance to the platforms.

Anonymous's picture

wow, the consideration of eliminating internal crossing as well as dark pools is huge. Bring on equal and fair access for all who participate.

deadhead's picture

President Obama....once again, I call on you to oust Mary

I would also ask that when you sit down to review your ten laters per day, you think a little about your transparency pledge.  Your administration has failed miserably on the transparency matter in regards to the manner in which the financial and banking sector is being treated.  Perhaps at the top of the list is the refusal by YOUR Fed Chairman (can't blame it on Bush anymore, cuz you renominated Bernanke) to be transparent about what the Federal Reserve is doing with our money.  He refuses to disclose which banks are at the discount window, Bloomberg sought the info in a FOIA request, got blown out, sued, and now your solicitor general is going to continue to fight this to support a lack of transparency by the Fed.

Your refusal to come out and support the Audit the Fed bill is stinging proof that your transparency promises are just that....promises with a lot of talk and no action.

I voted for you for change and transparency and I got suckered.  It won't happen again.

pigpen's picture


I talked to an aide of my male "so called" conservative senator from texas on why he was supporting the 15k housing credit. Poor aide just said bc it is good for the economy and helps supports housing prices.

I asked her why not just let housing prices fall to an affordable level.


I asked how he could be deemed conservative when he wants to subsidize almost $60 billion to elevate housing prices and consumption with leverage.


Dopes all around in terms of finance. He is in favor of auditing the FED - for some reason the party of the little people and principles the DONKEYS are more apt not to want to support full disclosure and transparency at the FED. Not sure why I would have guessed it would have been the elephants.

Oh well no difference between the two and I hate fantasy sports.



Anonymous's picture

And of course there will be no investigation of why, when most of all the markets around the world were down, the US futures held on nicely despite comments from others as the the shaky nature of the recovery, but of course the volume master knew that there was an upgrade that would move the market higher because they said so

buzzsaw99's picture

Have the SEC shut down the whining NYSE and change the name to GSSE. Problem solved.

Anonymous's picture

As soon as this dark pool problem is cleaned up, it will become necessary to make sure that existing and future exchanges are truly OPEN.
That means eliminating the nonsense that quote data belongs to the exchanges and that they are allowed to charge for them.
Only then, will the "playing field" be truly level.

Bubby BankenStein's picture

Thank you for doing the work you do to expose issues and provide education opportunities for anyone who cares to consider the information / views presented at ZH.

Your work is contributing much to society!!

spekulatn's picture


Well done ZH.



vreporter's picture

Dark pools will lose their luster on their own once we have made the "level playing field" safe enough for the large buy-side participants. That was the original reason for dark pool popularity and its solution will be the natural reduction of dark pool popularity.

Anonymous's picture

Let's make this simple.....

This is not just about dark pools....this is about TRUST....

All public securities....all asset classes....have to trade on

an open direct access de-fragmented electronic exchange....

First come....first the same cost of transfer....

The BATS technology is here to get this done....

Furthermore it is important that capital be efficient....and there should be no taxes on any security or transaction thereof....

The world's exchanges need to be combined and available yo all....for the spread of wealth by the willing....

And finally all factual information needs to be in wiki format....without biased opinion....

Then TRUST may return....

Anonymous's picture

How can anyone be sure HFT has been stopped? Is there a way of knowing? Has anyone checked to see if those switches are turned to "off" or are we taking their word as gold? Maybe they had their fingers crossed behind their back when they promised to quit HFT!

digalert's picture

Get rid of all the ignorant or complicit, or both, in the SEC for something with some fairness. Another peeve is AH trading, which was not supposed to be significant. Now, when the market opens and equities have moved 5%. WTF

Eduardo's picture

It is way overdue!!!

Anonymous's picture

Let's put it this way....

The tools were not available in the past to really have a fair exchange....

Market makers and specialists were required....the bid ask spread was wide....and executions were slow....and expensive....easily gamed by the brokerage firms....

The direct access electronic exchange has enabled independent individual traders to basically replace market makers and specialists....with the individual trader PC and the fast internet....However teh exchanges is still being gamed by dark pools and different types of "flash type" algos....

The solution is very simple....There should be a one second minimum....all commission rates should be the same....about 20 cents per 100 units....There should be no transactions allowed of any type away from the exchange....and all asset classes need to trade on a de-fragmented exchange....

There should be no account minimums or maximums....but there needs to be size limitations per account....

Margin needs to be the same for each standard account for both overnight and intra-day....4:1....

Short selling is allowed without cumbersome uptick rules....Again this is very simple.....Each stock has a known outstanding float....Short shares are first come first served and cannot exceed float .....This is easily accomplished by electronic tag....

And importantly .....factual information must be timely, available to all, at no cost in wiki format....

If people want opinions....they should be able to review the real performance of those who offer it....

Then the exchanges will be able to perform properly....and importantly should be free of all taxation in the name of efficient capital....

Also....this new fair exchange should be in the currency and language of choice....24/7....

The Worden "Freestockcharts" model along with BATS have proven the technology today.....Just think what is possible tomorrow....

Banks need to be separate from the securities business and serve local communities.....knowing their customers....If people want this route of CDs....they should feel comfort in their reliability....

IBs need to concentrate on supplying the exchange with symbols....and cannot be in conflict with their customers....The current business model is such that both banks and IBs business models are in conflict with their customers....

Make no mistake....these changes must be made....

And a new trustworthy regulator .....whose job is made easier by the above construct....needs to be established....The SEC has a bad name that needs to be done away with as it has become dis-trustful as well....and for good reason....Govt. employees should have time restrictions before they get to cross over to corp. 5 years....

Anonymous's picture

All of this is really old history dressed in more advanced technology. Once upon a time, the SEC warmed up to a CLOB, a public preference rule, and time priority. It should do so again, now that it is more feasible technologically to do so. Nothing stands in the way of accumulating undisclosed buy and sell interest, that is, dark pools. But, rather than being an undisclosed execution destination for marketable orders from others, that interest should have to be sent out to be executed against exposed bids and offers at the NBBO from time to time. No more in-house crosses. Walking up and down the central limit order book book for public orders (which would have a preference at any given price), defined in some way to exclude dealers, should be prevented by a gapping rule for outsized orders bigger than the aggregate buys and sells displayed at the NBBO to get a one-price trade for executions above or below the NBBO at the time the order seeks an execution, if a one-price execution is desired. The rule would give intervening displayed buyers or sellers the execution price away from the NBBO prevailing prior to entry of the book-clearing order. Aternatively, pieces of that dark pool interest could be exposed at a better price than the NBBO (maybe with a stop given by the executing broker-dealer, as in the days of the NYSE specialist when the specialist meant something) with the ability to obtain an automatic execution against the then prevailing NBBO, following time priority, after a time lapse of Q without being executed. Failure to display and expose one's order would forfeit the benefits of price and time priority in the bid/offer queue. No exemption for maket makers. If the aggregate buy and sell interest at a price the buyer or seller is willing to pay or accept is exhausted, the remainder of the order would have to wait to obtain an execution until other buy or sell interest was displayed by someone (the book or a maket maker) at an acceptable price or be displayed at that price, thereby obtaining time priority over later displayed interest at that price. How hard is this?