Market movers petition EU to roll back dark pool restrictions

Michael Bow
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LEADING global banks have made a last gasp attempt to convince EU finance ministers to roll back plans to increase transparency on anonymous trading platforms, known as dark pools.

The Association for Financial Markets in Europe (AFME), a trade group representing banks and investors, has written to the top finance minister in charge urging the EU to back down on plans to scrap a key plank of the system that preserves the anonymity of traders with large client orders.

It has warned ministers that the plan to restrict a pass which allows brokers to match tiny bits of a client order without flagging their position to the market – a so called reference price waiver ­– would lead to a loss of trading and liquidity and

“Without this protection, the smaller orders would signal the existence of a larger order, thus allowing short term trading strategies to profit at the expense of the long term investors, left with sub-optimal pricing,” the letter said.

Dark pools are set to come under restrictions in the form of the Markets in Financial Instruments Directive, known as Mifid, which is being finalised by the Council of European Union.