Securities regulators approved a plan to require U.S. off-exchange markets such as dark pools to boost disclosure about the transactions they handle.
The board of the Financial Industry Regulatory Authority, the private-sector overseer of U.S. brokerages, will propose rules to the government that would compel alternative trading systems to disclose the amount of volume they handle for each stock, according to a statement yesterday. Trading systems will also be assigned unique identification codes so it will be easier to track where each transaction takes place.
"This will allow Finra to monitor the trading that occurs in each ATS much more particularly and be able to identify if any abusive trading appears to occur," Finra Chief Executive Officer Richard G. Ketchum said in a video posted with the announcement. This is a "real positive step from a market integrity standpoint," he said.
The action, which Ketchum previewed in May, comes after U.S. exchanges have seen their share of American equity trading dwindle, prompting them to request regulators to consider curbing transactions off public markets. About a third of U.S. volume this year has taken place off exchanges, according to data compiled by Bloomberg.
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Estimates of trading in dark pools are published monthly by research firm Tabb Group LLC and institutional broker Rosenblatt Securities Inc. In April, Credit Suisse Group AG, operator of the largest U.S. dark pool, said it would stop providing data to Tabb and Rosenblatt.
Ketchum said in the video yesterday that Finra may eventually start using data sent from dark pools and other off-exchange markets to publicly report how much trading takes place on each.
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