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Integrity fears prompt closer scrutiny of 'dark' trades

8 Jan 2013 SYDNEY MORNING HERALD - GARETH HUTCHENS


THE Australian Securities Exchange has begun releasing weekly data showing the value of all "dark" trading on the local market.

The Monday's report showed that, from December 31 to January 4, dark trading accounted for 18.2 per cent of the value of all daily trades in Australia, and was worth $432 million a day on average.

It showed the average daily turnover of all trades, reported on both the ASX and its rival Chi-X Australia, was worth nearly $2.4 billion a day. The report covers all equity, warrant and interest-rate market transactions.

A spokeswoman said the ASX had decided to release the weekly reports in the interests of transparency, and because there was a lot of demand for the data.

"Dark trading" refers to trades that take place outside the order books of the ASX or Chi-X and subsequently reported to either of them.

They include trades on ASX's Centre Point - the country's biggest dark pool - and Chi-X's dark pool. They also include off-market trades such as traditional over-the-counter trades.

The issue of so-called dark execution - and the growth of dark pools, where orders are matched by electronic algorithms, then reported to the main exchange after a trade has been made - has received a lot of attention in the past year.

The Australian Securities and Investments Commission last year established a taskforce to consider if the growth in dark trading was damaging market integrity.

A consultation paper was released and new rules for dark pools will now apply from the middle of the year. .

The chief executive of the ASX, Elmer Funke Kupper, has warned in the past that, as off-market trades become more popular, liquidity could get sucked from the main exchange, making it harder and more costly for companies to raise capital.

Mr Funke Kupper also said more traders would opt to use dark pools instead of the main exchange to avoid high-frequency traders.