Development of trading system (IX) -- dark pool technology

One 、Dark Pool brief introduction

1、Dark Pool brief introduction

Dark Pool（ blackpool , Dark pool ） It refers to an electronic trading place that does not display public stock quotations . Dark pool trading first appeared in the United States , The main reason for the rise is mergers and acquisitions in the stock market 、 Acquisitions are becoming more frequent , The demand for transfer of bulk equity is closely related to the booming development .

Usually , Block trading can be done through the ordinary trading market ( direct 、 Split declaration 、 Iceberg / Keep the order hidden declaration method ) Or the OTC market  (OTC)  Make a deal , But there is inefficiency , High transaction cost , It may affect the market .

As investors become more and more afraid of the impact of their orders on the market and are unwilling to disclose trading information , Plus the development of electronic trading technology , Dark pool trading came into being . among , First appeared 、 At the same time, the most widely used form is matchmaking network .

In black pool trading , The buyer and the seller are paired anonymously for block stock trading , It is mainly bought and sold by institutional investors , Operation is not transparent , Will not display the order price and the identity of the person who quotes , Nor will details of executed transactions be disclosed to the public , It is very beneficial to institutional investors .

In recent years, , Blackpool has developed rapidly in European and American markets , There are dozens of registered dark pool trading platforms in the United States , Occupy a market share that cannot be ignored in the European and American securities markets .

at present , The securities traded in the black pool are mainly stocks and bonds , Some black pools can also trade foreign exchange 、 Trading open index funds （ETF）、 Derivatives and other securities products .

2、 The characteristics of black pool trading

The characteristics of black pool are as follows ：

（1） Confidentiality of pre transaction information

Both European and American regulators exempt Blackpool from the obligation of information disclosure before trading , The United States is in 《 Guidelines for alternative trading systems 》（Regulation ATS） It is allowed that ATS The average monthly trading volume of a certain security in the past 6 Months 4 More than the national average monthly trading volume for months 5% when , It is necessary to publicize the details of its best quotation order ; EU in 《 Financial instruments market regulations 》 For block transactions and transactions executed with reference to open market prices, the obligation of pre transaction information disclosure shall be exempted . Exemption from pre transaction information disclosure is conducive to the protection of block trading information 、 Reduce market price shocks , However, it also makes it difficult to monitor the liquidity of the dark pool 、 The uncertainty of transaction time and transaction price increases .

（2） The trading price refers to the open market , Blackpool itself does not participate in pricing .

Most of the black pools in Europe and the United States directly buy and sell at the best price in the market （NBBO） The middle price is the transaction price , May provide investors with a trading price superior to the market , But when the market fluctuates greatly , Investors may also suffer unexpected losses due to passive acceptance of market prices .

（3） Investors have the right to choose their counterparties .

A black pool trader can choose to send a trading intent order to a specific counterparty （Indication of Interest,IOI）, Disclose your trading target and direction . According to the behavior characteristics of different counterparties , Investors can identify high-frequency traders and other counterparties that are unfavorable to them , To avoid possible losses .

3、 The advantages of black pool trading

The attraction of black pool trading platform to institutional investors stems from three aspects ：

（1） Price advantage

Most black pool trading platforms are related to NBBO Mid point price matching , On the basis of the highest bid and the lowest selling price quoted by the exchange . Through large high-frequency transactions , The total seems to save a lot of costs .

（2） A lower cost

Black pool trading directly bypasses the exchange to reach a bilateral transaction , Make the buyer and the seller not need Pay to the exchange relevant Transaction fees , Compared with the Commission of traditional exchange order , Participants in black pool trading believe that the Commission and transaction fee of black pool trading are lower , To save money .

The anonymity of black pool trading is beneficial to business Main force or fund Big families hide their identities , prevent investment The movement was detected by the outside world too early , So that Transaction costs Increase or decrease in profits . therefore , Black pool trading is better than traditional trading control Intangible costs .

（3） Sufficient liquidity

The black pool trading platform has the ability to avoid fluctuations in market liquidity , Its independence can ensure that the black pool trading platform can obtain liquid resources . The decline in the trading volume and average trading scale of the exchange means that the liquidity of the exchange is reduced , At this time, investors can seek some liquidity from the black pool trading platform , Especially small and medium-sized stocks .

Black pool trading quickly splits large transactions into a number of small transactions business , On a private trading platform pairing , Avoid real-time demand and supply Bulk trading An impact , Thereby reducing Asset prices Fluctuation .

4、 The disadvantages of black pool trading

The disadvantages of black pool trading are as follows ：

（1） Black pool trading will affect the stability of the market

Black pool trading is off exchange trading , In the existing technology and The system Under the condition of , The scale of black pool trading cannot be accuracy Statistics , direct influence The stock market Pricing and impact on market pricing , The final impact market Of stability , trigger market Control the crisis , For the existing banking system Produce impact .

（2） The market is easily controlled by institutions

With the development of black pool trading, the market is likely to be controlled by most institutions . Individual investors are very likely to bear the responsibility of fighting against institutions alone risk , It will cause heavy losses to individual investors in the market .

（3） Market supervision is difficult

When the scale of black pool trading becomes larger and larger , Market monitoring becomes more and more difficult , bring Insider trading Happen probability Increase , It is difficult for the market to play a monitoring role , Capital markets The surge of may destroy the whole in the future The financial system And the investment confidence of individual investors .

5、Dark Pool Development of transaction

Dark pool trading first appeared in the United States , The main reason for the rise is mergers and acquisitions in the stock market 、 Acquisitions are becoming more frequent , The demand for transfer of bulk equity is closely related to the booming development .

Usually , Block trading can be done through the ordinary trading market ( direct 、 Split declaration 、 Iceberg / Keep the order hidden declaration method ) Or the OTC market  (OTC)  Make a deal , But there is inefficiency , High transaction cost , It may affect the market .

As investors become more and more afraid of the impact of their orders on the market and are unwilling to disclose trading information , Plus the development of electronic trading technology , Black pool trading came into being , One of the earliest 、 At the same time, it is also the most widely used matchmaking network .

1986 year ,Instinet The company established the first real modern black pool ：After Hours Cross Matchmaking network . 

1987 year ,ITG company （Investment Technology Group） establish , And with Barra Jointly issued by the company POSIT（Portfolio System for Institutional Trading） Matchmaking network .

2001 year , Seth · Maureen （Seth Merrin） found Liquidnet（ Liguan trading network

）,  Help large asset management institutions to establish an anonymous trading platform . at present , Liguan trading network has become one of the major independent black pool trading platforms in the world , Now it covers the whole world 46 One market , Possession 1000 An institutional client , The total scale of assets under management is as high as 15 Trillions of dollars .

2005 year , Goldman Sachs launched in the United States SIGMA X Black pool platform .

2006 year , Nomura Securities in Japan 12 $billion from private equity group Silver Lake In the hands of Instinet.

2006 year , Morgan Stanley launched a black pool trading platform MS Pool.

2008 year , London Metal Exchange LME Launch the black pool trading platform Turquoise.

2009 year , Goldman Sachs introduced a black pool trading platform in Hong Kong SigmaX.

2009 year 2 month , The New York Stock Exchange in conjunction with HSBC 、 Morgan chase 、 BNP Paribas launched a dark red trading platform SmartPool.
2009 year 12 month , Nomura Securities launched the black pool trading platform NX.

2010 year 3 month , UBS group （UBS） Launch of black pool trading platform in Europe PIN.
2015 year 11 month , Fidelity International Investment （Fidelity Investment） etc. 9 Asset management giants officially launched the black pool trading platform Luminex.Luminex Invested by Fidelity International （Fidelity Investment） launch , Other consortiums involved in the formation include BlackRock group (BlackRock, Inc.)、 Capital Group （Capital Group Capital）、MFS Investment management company （MFS Investment Management）、 Jingshun group (Invesco)、 General credit group (T Rowe Price)、 Morgan Fleming asset management （JPMorgan Asset Management）、 State Street bank (State Street) And the Bank of New York Mellon （Bank of New York Mellon） formation . among , Fidelity international investment holds about 60% Equity of , Other shareholders shall be respectively responsible for 4.9％.

2017 year 5 month , Goldman Sachs launched a new black pool trading platform Sigma X-Squared And shut down Sigma X.

2019 year 7 month ,UBS Introduce black pool trading platform in Australia PIN.

Two 、 Exchange reaction

1、 The New York Stock Exchange

The New York Stock Exchange took a positive counterattack against the black pool ,2009 year 2 month , The New York Stock Exchange and HSBC 、 Morgan chase 、 BNP Paribas and other investment banks launched a black pool trading platform SmartPool, Directly against various black pool trading platforms .

2、 Nasdaq Stock Exchange

NASDAQ severely criticized the opacity of black pool trading , But at the same time, it is also establishing its own black pool trading platform .2010 11 month , The United States  PSX  through  NASDAQ OMX Nordic The platform launched black pool trading services .

3、 The London Stock Exchange

The London Stock Exchange took a positive counterattack against the black pool ,2009 year 12 month , The London Stock Exchange announced that it would take it off the black pool trading platform Baikal With the black pool trading platform Turquoise A merger , The new platform name is Turquoise, The London Stock Exchange holds 60%,Turquoise The initial investor of （ Several investment banks ） Hold the remaining shares .

4、 Hong Kong Stock Exchange

2015 year 5 month 16 The securities and Exchange Commission of Hong Kong decision Individual investors are prohibited from participating in the black pool trading platform , The new system came into being in 2015 year 12 month 1 Take effect .

Although Blackpool trading in Japan and Australia And other Asian markets have grown , However, the Hong Kong Securities Regulatory Commission has implemented a strong regulatory restraint policy on black pool trading , Black pool trading has been developing slowly in Hong Kong , One of the reasons is that the high transaction fees make it almost impossible to make money in high-frequency trading on the Hong Kong stock exchange , Black pool trading has lost its important selling point , That is, it is impossible to prevent automated traders from gaining information advantage by keeping prices confidential .

3、 ... and 、Dark Pool Transaction supervision

1、Dark Pool Transaction supervision

1998 year 12 month , The securities and Exchange Commission of the United States issued 《ATS Regulations 》 And announce the right ATS Implement regulation ,ATS（ Alternative trading system ） May declare and register as an exchange . Black pool needs to be registered as an alternative trading system , And regulated by the securities and Exchange Commission of the United States .

2007 year 11 month 1 Japan , The European Union 《 Financial market instruments directive 》(MiFID) take effect , Black pools need to be registered as multilateral trading facilities （MTF）, European Securities and Markets Authority （ESMA） regulatory .

2011 year 8 month , The SFC of Hong Kong prohibits HSBC from providing retail investors with StockMax Black pool trading service , It can only serve professional investors .

2012 year 10 month , The Hong Kong stock exchange requires all black pool trading participants to make mandatory declarations to the Hong Kong stock exchange for all Hong Kong stock transactions conducted in the black pool , And with an alternative trading platform (ALP) Mark , The data including the transaction amount is within one minute after execution , Report to the Hong Kong stock exchange . HKEx is responsible for collecting transaction data , Then report to the Hong Kong Securities Regulatory Commission , The data is not published .

2013 year 1 month , The financial industry regulator (Financial Industry Regulatory Authority) It plans to expand the supervision of black pool trading platforms .

2015 year 11 month , Securities and Exchange Commission （SEC） Put forward new regulations to strengthen the supervision of Blackpool .

2015 year 11 month , The European Central Bank announced to strengthen the supervision of black pool trading .

2015 year 12 month 1 Japan , The SFC decision It is forbidden for brokerage institutions to provide black pool trading to individual investors , At the same time, it is required to increase the transparency of trading activities .

2018 year 1 month , The European Union officially launched the European financial instruments market directive （Markets in Financial Instruments Directive II , MiFID II）, And in 2018 year 1 month 3 Take effect .

2、Dark Pool Regulatory penalties

2014 year 6 month , The SEC announced Liquidnet The company has violated its regulatory business and its commitment to users of the company's alternative trading system , Allowing departments outside the black pool business to obtain their confidential transaction data is punished 200 $10000 fine .

2015 year 1 month , The SEC accused UBS （UBS） The securities department violates the information disclosure regulations in the operation of the black pool , There are other regulatory violations , UBS Securities agreed to pay 1440 USD 10000 settlement fee , These include 1200 Ten thousand dollars fine .

2015 year 8 month , The Hong Kong Securities Regulatory Commission announced that BNP Paribas Securities, a subsidiary of BNP Paribas, had been opened for lack of and violation of black pool trading services 1500 A fine of ten thousand Hong Kong dollars , As a result, BNP Paribas 11 month 6 The black pool stock trading platform in Hong Kong was closed on the th .

2015 year 12, The Hong Kong Securities Regulatory Commission announced that JP Morgan's broker ( Hong Kong )、 JPMorgan Securities ( Asia-Pacific ) And JPMorgan securities ( far east ) Three subsidiaries are shorting 、 There are many violations of regulations and lack of internal control in facilitating customers, proprietary trading business and black pool trading services , The CSRC condemned , And fine them respectively 1500 Million Hong Kong dollars 、1200 Ten thousand Hong Kong dollars and 300 Million Hong Kong dollars .

2016 year 2 month , The SEC announced , Barclays Bank and Credit Suisse were punished respectively for illegal black pool trading 7000 Ten thousand dollars sum 8430 Thousands of dollars .

2016 year 12 month , US regulators announced that Deutsche Bank （DB） To be paid 3700 Million dollars to settle the U.S. government's Its How to transfer the transaction to the black pool private transaction channel .

2018 year 7 month 10 Japan , The Hong Kong Securities Regulatory Commission announced that Citigroup Global was due to its black pool trading platform Citi Match They were condemned and fined for failing to identify customers and provide platform guidance to users 400 HK $10000 .