Salient to Investors:
Trading in US equity markets is spread across 13 stock exchanges and 50 dark pools. A third of US volume occurs away from exchanges.
Justin Schack at Rosenblatt Securities said that from 2008 through 2010, big banks expanded their dark pools by using them as the first destination to which their trading desks routed orders. Trading occurring away from U.S. exchanges and the biggest markets known as ECNs was 33 percent in October 2012 versus 16 percent in early 2008. Dark pools accounted for less than half the off-exchange volume 2 months ago, but up threefold since Q1 2008. 19 US dark pools accounted for 13.4 percent of total equities volume in October.
Joseph Mecane at NYSE Euronext said that at least 40 percent of trading occurs away from exchanges for more than 3,000 US securities, while 42 percent of trading for the 709 securities listed on NYSE MKT took place off-exchange in November.
Public exchanges receive market data revenue for the sale of information about transactions and quotations. Dark pools have a duty to get their clients the best trade possible and face limitations on how much market share they can amass and still remain private.
Finra gets the funds for trading that occurs away from exchanges including on dark pools.
In 2012, 0.18 percent of US equities volume was voided by exchanges or Finra because the trades were deemed erroneous, versus 0.23 percent in 20122 and a high of 0.43 percent in 2004.
Bloomberg say US equities volume has averaged 6.4 billion shares a day in 2012, versus 7.8 billion shares in 2011 and 9.7 billion shares a day in 2009.
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