IBFed responds to IOSCO consultation report on issues raised by dark liquidity - 10/02/11

10 Feb 2011

IBFed has commented on an IOSCO consultation report on dark liquidity.  In commenting, IBFed has agreed with IOSCO that:

  • conceptually, a distinction needs be drawn between dark pools (i.e. pools of liquidity that provide no pre-trade transparency) and dark orders (i.e. orders for which there is no pre-trade transparency, notwithstanding the level of transparency of the venue where the order is received).
  • both dark pools and dark orders are not a new market feature and that both have existed - in levels that have not been subject to proper measurement - for a good reason, notably, to preserve an adequate level of anonymity for the quote and to execute orders minimising their market impact. Importantly, dark pools and dark orders meet a demand in the market.
  • dark pools and dark orders are currently more prominent due to automation and the use of electronic trading. The increasing notability of dark liquidity is, therefore, a consequence of the advent of technology and broad market innovation.

The IBFed comment is available here.

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