Media Room

Dark Pool Volume Market Share Lowest Since June '10

Monday, October 24, 2011


By Steven Russolillo and Brendan Conway
NEW YORK (Dow Jones)--Market volatility pushed stock trading away from private trading venues again last month, as huge market fluctuations turned public, or "lit", exchanges into the more attractive trading option.

Private stocks venues, known as "dark pools," lost market share for a second straight month in September, according to data released Monday by Rosenblatt Securities. That's true even though overall trading in the markets surged, due to frenetic buying and selling by worried investors.

Dark pools saw the smallest overall share since June 2010, according to the data. Their share of the trading market fell to 10.7% of U.S. equity volume in September, down from 11.2% a month earlier and 12.08% in the year-ago period.

The declining "dark pool" volumes come as exchanges like NYSE Euronext's (NYX) platforms and competitor Nasdaq OMX Group (NDAQ) have seen a few months of strong trading activity amid concerns about U.S. economic growth and Europe's sovereign-debt crisis.

All 18 of the dark pools tracked in the Rosenblatt analysis saw lower month-over-month volume as a percentage of market share.

The trend has shown up in brokerage and trading-firm earnings reports like those of Interactive Brokers Group Inc. (IBKR) and Knight Capital Group Inc. (KGC), each of which showed strong volumes in their quarterly reports.

Dark pools' smaller slice of the trading pie underscores how investors react in a difficult market, often turning to "lit" venues that they consider more reliable during volatile times.

"The reduction in dark market share was not surprising given its historical negative correlation with volatility," wrote Justin Schack, managing director at Rosenblatt Securities.

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