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Senator Schumer Begins Dark Pool Crack Down
WASHINGTON, DC—U.S. Senator Charles E. Schumer (D-NY) will hold a conference call with Duncan Niederauer, CEO of the New York Stock Exchange (NYSE), on Tuesday, October 20, 2009 at 12:30 pm to urge the Securities and Exchange Commission (SEC) to institute a series of reforms to better regulate dark pools. Schumer will release a letter he is sending to SEC Chairwoman Mary Schapiro urging several different measures that would help ensure that dark pools and other nonconventional trading platforms operate on a more level playing field with the traditional stock exchanges, such as NYSE and NASDAQ.
Schumer and Niederauer will call for the SEC to revisit the decade-old Regulation ATS, which first allowed for non-exchanges’ entry onto the scene. Schumer will say that these alternatives can provide healthy competition for the exchanges, and have had significant benefits for retail investors. But now that they play such a central role in our marketplace they should be required to adhere to a more robust regulatory framework and bear their fair share of the costs for maintaining a market infrastructure, now borne disproportionately by exchanges like NYSE and NASDAQ.
The announcement will come one day before the SEC convenes an open meeting at which it will address several issues related to the operation of dark pools. The agency is expected to consider new rules along the lines of some of the reforms to be suggested by Schumer and Niederauer.
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one regulates dark pools by making them not dark. put every transaction on an exchange for transparency. not that i think schumer and shapiro will actually doing anything
Thank you very much to ZH for working this matter so diligently.
My emotional side wants to cheer Schumer on. I want heads on pikes and blood running in the streets.
My intellectual side wants to know why Schumer is sticking his head into a cage of hungry crocodiles. He doesn't appear to be irrational or have a death wish. So why?
Because the biggest loser from alternative trading facilities is the NYSE, which has seen its share of volume drop.
Schumer is just trying to bring in more money for the NYSE, which aside from bringing in lots of money for NYS is a contributor to Schumer.
Some of the dark pools are NYS entities, but not all - so on balance, I he thought it was better for him to go after dark pools than not.
Shining a light on dark pools is feeding fuel to HFT at the expense of retail traders with money parked in mutual funds.
Flash was a non-issue... but making it so that technologically non-sophisticated funds can't make trades in dark pools would be the gift that keeps on giving to HFT.
I am not surprised that the senior Senator from NY is working with the NYSE - the exchange that has lost the most volume to dark pools, to either reign them in or collect a pound of flesh for the NYSE. If this results in dark pools just paying some money for "infrastructure" like SIAC, that's fine, but anything that sheds additional light on them is crazy.
What I continue to be surprised about is that most of the folks on this blog who seem to utterly hate anything that smells of computers trying to trade in front of retail are in support of killing of dark pools.... as those 2 views are completely divergent.
I'm one of the few posters on this blog who will make more money by any additional dark pool illumination, and I'm still against it... so I can't possibly imagine what the rest of you (with few notable exceptions like KD) are thinking.
Sunshine is the best disinfectant. Either everything is transparent or everything is dark. Set one standard for all exchanges and ATS etc. and let the chips fall where they may. There is no question that the newer trading venues have prospered without the regulatory burden that has been borne by the traditional exchanges.
and since ZeroHedge's relentless assault on HFT has shown that having everything transparent isn't really what people want - since it gives the fastest and best an edge over the slow and ignorant, it's clear to me that totally dark is the answer. As I've said before - i think one big aggregate dark pool would be the best and "fairest" marketplace.
I disagree. The people want transparency. The direct Edges, the ITG's, the Goldmans , and the dirtbag hedge funds are in favor of what we have today; namely "innovative" (which equals unregulated ) alternative trading venues that draw market share from traditional,regulated exchanges. It is a two-tiered market place that is unfair. Faster is not smarter. Faster just gets in the way faster. The answer is to hold everyone to the same standards. Either remove the competitive regulatory disadvantage from the traditional exchanges, or make the dark pool,ATS,ECN of the world report their trades and regulate their marketplace.
hmmm.. .I don't think the people want transparency - when we have transparency, "the people" can't compete - haven't we proven that with the war on HFT? Dark pools are a beautifully level playing field - if people got over the fear and rage, i think they'd figure that out.
Dark Pools are beautiful and level only to those who benefit from them. They can't have it both ways. Either markets are public, or they aren't. There has to be one standard and I think Schumer is right on target here. The Dark Pool game is over.
I'm sure not too many people here have agreed with you, peterpeter, but in this instance I think you're right on the mark.
It's hard for me to conclude this is more a "crackdown" on dark pools, per se, than it is Schumer catering to protecting the interest of NY state-based exchanges.
And I'm not sure that dark pools require total illuminiation, but they need to pay their fair share on infrastructure and probably need a little more oversight (as if that will happen).
Perhaps a more level playing field may influence the SEC to abandon the NYSE's "supplemental liquidity provider" program, for which it seems Goldman is still managing to dominate... for some odd reason. Somthing tells me that this isn't what Schumer is really after...
While I agree with you guys that elimination of dark pools hurts the larger mutual fund types to the benefit of the prop or algo trading firms - -I think everyone should realize that mutual funds are probably the most hurtful financial types to mom and pops. So, while dark pool elimination would hurt mom and pop in the end - its only because they invest in horribly designed vehicles called mutual funds. Endless fees, dumb rules like forcing managers to be invested 95 - 100% long all the time, and so big that the fund cant get in or out with any speed whatsoever. This makes the chances of success relative to the market close to zero for the retail investor.
Does anyone see a conflict-of-interest when something like Goldman owns a dark pool?
Oh, and now we need to trade options in seven decimal places?
http://gset.gs.com/resources/9.0_External_One_Pager_v4.pdf
Well, not only do they own and control their own "dark pool", they get "liquidity rebates" from the NYSE in boatloads.
What's wrong with THAT picture?
Why? its a win/win for him, subscribe to the populist view of corruption and do nothing and get votes...bookended demogagie! He is looking to survive the next electricution!
I would benefit from a dark pool illumination. The reason I would like to see dark pools forced to an equal playing field is that the spirit of the law states clearly that all bids and asks should be posted to a centralized marketplace, and that any activity that decentralizes orderflow is bad. The spirit of the law should be upheld. Dark Pools are in a grey area at best...and in my opinion downright in a red area.
What had been sold as innovation is really just a Goldmanesque
version the rules are for everybody else. The original intention of the "alternative trading systems/venues" was to reward displayed liquidity by harnessing the speed and efficiency of computers. Sadly, the outcome does just the opposite at everyone's expense. Dark interest does not serve the marketplace and should be eliminated. IOI's are a scam.
Talk about constituent service!
Is this for real? There is nothing about such a call on http://schumer.senate.gov/ or nyse.com. Anyone with details?
Hello my pussycats ! Public securities must trade on public markets. End of discussion.
Crack down by Senator Schumer, the ultimate dark pool