CALL in the stewards. How on earth did the big investment banks manage to nobble ASIC’s entirely sensible suggestion that retail broking trades should not be sucked into ”dark pools” where deals occur, as the name suggests, in the dark?
Computer-powered, high-frequency trading and dark pools and their ilk – trading systems that match buyer and seller behind closed doors – are changing the nature of sharemarkets worldwide, and Australian Securities and Investments Commission deputy chairman Belinda Gibson gave an insight into what is happening when she addressed the Ownership Matters governance conference in Melbourne yesterday.
It used to be, she said, that you could bet that a trade of $30,000 or less was for a retail investor, and an equally safe bet that big institutions and professional traders were behind trades worth more than that.
Now it’s the reverse. Trades for $30,000 and more in the traditional ”lit” markets such as the ASX, where bids and offers are publicly posted, are often by retail investors. Computer-powered high-frequency traders are the ones booking tiny trades, in vast numbers – and the big institutions are increasingly using unlit or ”dark” markets where they can get set without telling the market as a whole.