30 November 2015

European Parliament backs dark pool regulation

09 November 2010  |  8282 views  |  1 mifid

The European Parliament's economics committee has backed a report calling for tougher regulation of dark pools and high-frequency trading.

The committee has adopted the European Conservatives and Reformists economics spokesman Kay Swinburne's report and its position will now be "taken into account" when the EC reviews the Markets in Financial Instruments directive (MiFID)and Market Abuse Directives (MAD).

Swinburne says that, while MiFID has benefited the EU's financial markets through increased competition, it has coincided with a huge increase in the use of technology and speed of trading.

She warns that technological advances require more sustainable legislation to reduce levels of systemic risk and ensure fair competition and market integrity.

"At the moment, there is a worrying lack of information readily available regarding the over-the-counter space, on broker-operated dark pools and on high frequency trading strategies. The European Parliament is asking for much more information to be made available and collected in a usable form," says the MEP.

"The only way to really understand whether the market is functioning correctly is for regulators to have enough information to see what is going on in the market. When practices like quote stuffing and spoofing are alleged to be taking place alongside supposed barracuda trading strategies which seem to be forcing long term investors into trading within dark pools it suggests that some kind of market dysfunction may be taking place."

The EC is expected to publish plans for its proposed MiFID overhaul early next year, with dark pools and high-frequency trading high on the agenda.

In the US, the Securities and Exchange Committee is also examining the issue. The agency yesterday moved to ban stub quotes and also suggested fine-tuning circuit breakers, which are used to stop trading in stocks undergoing extreme volatility. SEC chief Mary Schapiro on Monday also said that the watchdog is examining proposals to mandate risk controls in algorithms that would force them to slow down during rapidly fluctuating market conditions.

Comments: (1)

A Finextra member | 10 November, 2010, 17:57

This has to be good for the investor but hardly great news for brokers. Could this bring about a move towards Stock Exchanges away from MTFs and the like?

Be the first to give this comment the thumbs up 0 thumb ups! (Log in to thumb up)
Comment on this story (membership required)
Log in to receive notifications when someone posts a comment

Finextra news in your inbox

For Finextra's free daily newsletter, breaking news flashes and weekly jobs board, sign up now.

Related stories

28 October, 2010
31 August, 2010
08 July, 2010
14 January, 2010
21 October, 2009
09 October, 2009
23 September, 2009
21 September, 2009
19 June, 2009

Related company news

Your browser is unable to support Flash files.

Top topics

Most viewed Most shared
BBVA buys 29.5% stake in Atom for £45...
8170 views comments | 34 tweets | 42 linkedin
Former Barclays chief forecasts massive jo...
7375 views comments | 30 tweets | 35 linkedin
EPC publishes proposals for pan-European i...
7110 views comments | 34 tweets | 32 linkedin
WeChat launches mobile wallet in South Afr...
6390 views comments | 20 tweets | 16 linkedin
BBVA Bancomer first to roll out dynamic CV...
5971 views comments | 14 tweets | 21 linkedin

Featured job

to $120K base, double OTE, benefits
New York City, NY or Boston, MA (USA)

Find your next job