Banks defend dark pools in row with bourses over trading share

INVESTMENT banks yesterday launched a fresh defence of “dark pool” share trading, saying the practice is not nearly as widespread as suggested by Europe’s stock exchanges and should therefore pose few regulatory concerns.

Only 16 per cent of trading takes place in European off-exchange trades, according to the Association for Financial Markets in Europe (AFME), as opposed to the 40 per cent quoted by bourses.

European lawmakers are currently considering changes to Markets in Financial Instruments Directive (Mifid) rules that would force greater transparency requirements on off-exchange venues, such as “broker crossing networks” operated by AFME members.

Yet the new figure argues against the size of the off-exchange, or over-the-counter (OTC) market, which AFME says ought to be a key consideration for rulemakers to consider.

Managing director of equities at AFME Christian Krohn said: “In light of the ongoing Mifid review and regulatory proposals around OTC trading, it is critical that policy makers have a full and accurate understanding of the nature and scale of the OTC market.”