美国的证券交易也有黑市# Stock
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公布的交易价还能相信吗？
Dark markets may be more harmful than high-frequency trading
http://finance.yahoo.com/news/dark-markets-may-more-harmful-044
NEW YORK (Reuters) - Fears that high-speed traders have been rigging the U.S
. stock market went mainstream last week thanks to allegations in a book by
financial author Michael Lewis, but there may be a more serious threat to
investors: the increasing amount of trading that happens outside of
exchanges.
Some former regulators and academics say so much trading is now happening
away from exchanges that publicly quoted prices for stocks on exchanges may
no longer properly reflect where the market is. And this problem could cost
investors far more money than any shenanigans related to high frequency
trading.
When the average investor, or even a big portfolio manager, tries to buy or
sell shares now, the trade is often matched up with another order by a
dealer in a so-called "dark pool," or another alternative to exchanges.
Those whose trade never makes it to an exchange can benefit as the broker
avoids paying an exchange trading fee, taking cost out of the process.
Investors with large orders can also more easily disguise what they are
doing, reducing the danger that others will hear what they are doing and
take advantage of them.
But the rise of "off-exchange trading" is terrible for the broader market
because it reduces price transparency a lot, critics of the system say. The
problem is these venues price their transactions off of the published prices
on the exchanges - and if those prices lack integrity then "dark pool"
pricing will itself be skewed.
Around 40 percent of all U.S. stock trades, including almost all orders from
"mom and pop" investors, now happen "off exchange," up from around 16
percent six years ago.
This trend is "a real concern," John Ramsay, former head of the U.S.
Securities and Exchange Commission's (SEC) Trading and Markets division,
said on the sidelines of a conference in February. "We have academic data
now that suggests that, yes, in fact there is a point beyond which the level
of dark trading for particular securities can really erode market quality."
Given the $21.4 trillion worth of U.S. stocks that were traded in 2012, even
a small mispricing can move the needle by tens of billions of dollars.
Lewis' new book - "Flash Boys: A Wall Street Revolt" - says that high speed
traders bilk that kind of money from investors every year. He focuses on how
high-frequency trading firms use ultra- fast telecom links, microwave
towers and special access to exchanges to gain an edge over other traders.
The U.S. Justice Department is investigating high-speed trading for possible
insider trading, Attorney General Eric Holder told lawmakers on Friday.
Other regulators and the FBI have also confirmed they are looking into
potential wrongdoing by high-frequency stock traders.
But whether or not high-speed trading is sinister, revenues for these firms
have been declining for years: in 2013, they were about $1 billion, after
peaking at around $5 billion in 2009, according to estimates by Rosenblatt
Securities. If, as Lewis says, these traders are doing nothing more than
ripping off the rest of the market, it's a shrinking problem.
Meanwhile, as the revenue from high frequency trading has waned, trading
outside of public exchanges has been on the rise, threatening to roll back
decades of progress towards more transparent markets.
EXCHANGES ARE LAST RESORT
A brokerage has several ways to fill customers' orders. It can match buy and
sell orders from its own customers, known as "internalizing," or sell its
orders to another broker that can do the same.
Brokers also send trades to "dark pools," which are similar to exchanges,
except the fees are lower and they are anonymous, with orders going
unreported until after they have been executed. And finally, they can send
trades to exchanges, where they will have to pay higher fees.
"The exchanges have basically become the liquidity venue of last resort,"
said Manoj Narang, chief executive of HFT firm and technology vendor
Tradeworx.
Around 45 dark pools and as many as 200 internalizers compete with 13 public
exchanges in the U.S.
Top internalizers include units of KCG Holdings (KCG), Citadel, UBS (UBSN.VX
), and Citigroup (NYS:C). Dark pool operators include Credit Suisse (CSGN.VX
) and Morgan Stanley (MS). All of the firms declined to comment, or did not
respond to requests for comment for this story.
With the incentive to use the public market eroding, many traders
increasingly see exchanges, which are often described as "lit" markets
because of the pricing transparency, as battlegrounds for high frequency
traders, said Rhodri Preece, of the CFA institute.
The result is an increasingly splintered market.
"So much of the U.S. equity order flow is in now in the dark, or siphoned
off, that it never hits the lit exchanges, and there is just a lot less in
the way of trading opportunities," said Mark Gorton, CEO of high frequency
trading firm Tower Research Capital LLC.
In an attempt to win back some of the retail orders, exchanges such as
IntercontinentalExchange Group's (ICE) New York Stock Exchange, Nasdaq OMX
Group (NDAQ), and BATS Global Markets, have allowed brokerages to place dark
pool-style orders on their platforms, with the trade hidden until after it
is executed. NYSE, Nasdaq, and BATS declined to comment.
There is no doubt that trading costs on U.S. markets are low, and that
retail investors get a better deal than they did two decades ago. But U.S.
and global trading transaction costs have actually been rising for the past
two years, according to a Credit Suisse report on February 20. That may
suggest the benefits from off-exchange trading are no longer accruing to
investors as much as they previously did.
TRADE SECRECY
A major concern with off-exchange trading is that brokers who internalize
trades and offer dark pools do not provide any data to the market before the
trade is executed. On a stock exchange, when an order is sent in, the price
of the stock is adjusted and everyone with a data feed sees it.
Dark pools only report data after a trade has occurred. At that stage,
information about the trade has little influence on the price.
The pools were originally created for institutions to trade large blocks of
stock without creating a large impact in the market. If an order of 1
million shares was tracked, people on the other side of the trade could
quickly jack up prices and the original investor could easily pay more than
expected.
But much of the trading isn't like that now - the average size of orders in
dark pools has shrunk to around 200 shares, similar to levels on public
exchanges.
"There are potential costs from this trend of having more and more trading
being traded away from exchanges," said the CFA's Preece.
IEX, a new trading platform heralded in Lewis's "Flash Boys" as a fairer
place to trade, aims to become an exchange once it gains more volume, but is
currently a dark pool. Its average order size is around 750 shares.
"If the shift becomes too egregious to off-exchange markets, then there are
no lit exchanges to price against," said Brad Katsuyama, CEO of IEX. "I don'
t know if we are necessarily at the imbalance yet," he said.
Preece released a study on off-exchange trading in November that showed that
once more than half of the trading volume in a particular security is done
on dark venues, the ability to properly price that security becomes
difficult. The price discovery process can begin to erode when off-exchange
trading in a security surpasses as little as 10 percent, according to a
study by Carole Comerton-Forde and Talis Putnins of the University of
Melbourne.
Regulators in Canada and Australia have taken steps to curb the growth of
dark trading in recent years by requiring, for instance, that off-exchange
trades be of a minimum size or have a significantly better price than can be
found on an exchange. Authorities in Europe and Hong Kong are eying similar
rules.
"Observing some of the trends in U.S. markets and elsewhere and seeing that
dark trading activity in Canada was slowly growing we felt that we wanted to
put some very important principles in place," said Wendy Rudd, head of
market regulation at the Investment Industry Regulatory Organization of
Canada.
Dark markets may be more harmful than high-frequency trading
http://finance.yahoo.com/news/dark-markets-may-more-harmful-044
NEW YORK (Reuters) - Fears that high-speed traders have been rigging the U.S
. stock market went mainstream last week thanks to allegations in a book by
financial author Michael Lewis, but there may be a more serious threat to
investors: the increasing amount of trading that happens outside of
exchanges.
Some former regulators and academics say so much trading is now happening
away from exchanges that publicly quoted prices for stocks on exchanges may
no longer properly reflect where the market is. And this problem could cost
investors far more money than any shenanigans related to high frequency
trading.
When the average investor, or even a big portfolio manager, tries to buy or
sell shares now, the trade is often matched up with another order by a
dealer in a so-called "dark pool," or another alternative to exchanges.
Those whose trade never makes it to an exchange can benefit as the broker
avoids paying an exchange trading fee, taking cost out of the process.
Investors with large orders can also more easily disguise what they are
doing, reducing the danger that others will hear what they are doing and
take advantage of them.
But the rise of "off-exchange trading" is terrible for the broader market
because it reduces price transparency a lot, critics of the system say. The
problem is these venues price their transactions off of the published prices
on the exchanges - and if those prices lack integrity then "dark pool"
pricing will itself be skewed.
Around 40 percent of all U.S. stock trades, including almost all orders from
"mom and pop" investors, now happen "off exchange," up from around 16
percent six years ago.
This trend is "a real concern," John Ramsay, former head of the U.S.
Securities and Exchange Commission's (SEC) Trading and Markets division,
said on the sidelines of a conference in February. "We have academic data
now that suggests that, yes, in fact there is a point beyond which the level
of dark trading for particular securities can really erode market quality."
Given the $21.4 trillion worth of U.S. stocks that were traded in 2012, even
a small mispricing can move the needle by tens of billions of dollars.
Lewis' new book - "Flash Boys: A Wall Street Revolt" - says that high speed
traders bilk that kind of money from investors every year. He focuses on how
high-frequency trading firms use ultra- fast telecom links, microwave
towers and special access to exchanges to gain an edge over other traders.
The U.S. Justice Department is investigating high-speed trading for possible
insider trading, Attorney General Eric Holder told lawmakers on Friday.
Other regulators and the FBI have also confirmed they are looking into
potential wrongdoing by high-frequency stock traders.
But whether or not high-speed trading is sinister, revenues for these firms
have been declining for years: in 2013, they were about $1 billion, after
peaking at around $5 billion in 2009, according to estimates by Rosenblatt
Securities. If, as Lewis says, these traders are doing nothing more than
ripping off the rest of the market, it's a shrinking problem.
Meanwhile, as the revenue from high frequency trading has waned, trading
outside of public exchanges has been on the rise, threatening to roll back
decades of progress towards more transparent markets.
EXCHANGES ARE LAST RESORT
A brokerage has several ways to fill customers' orders. It can match buy and
sell orders from its own customers, known as "internalizing," or sell its
orders to another broker that can do the same.
Brokers also send trades to "dark pools," which are similar to exchanges,
except the fees are lower and they are anonymous, with orders going
unreported until after they have been executed. And finally, they can send
trades to exchanges, where they will have to pay higher fees.
"The exchanges have basically become the liquidity venue of last resort,"
said Manoj Narang, chief executive of HFT firm and technology vendor
Tradeworx.
Around 45 dark pools and as many as 200 internalizers compete with 13 public
exchanges in the U.S.
Top internalizers include units of KCG Holdings (KCG), Citadel, UBS (UBSN.VX
), and Citigroup (NYS:C). Dark pool operators include Credit Suisse (CSGN.VX
) and Morgan Stanley (MS). All of the firms declined to comment, or did not
respond to requests for comment for this story.
With the incentive to use the public market eroding, many traders
increasingly see exchanges, which are often described as "lit" markets
because of the pricing transparency, as battlegrounds for high frequency
traders, said Rhodri Preece, of the CFA institute.
The result is an increasingly splintered market.
"So much of the U.S. equity order flow is in now in the dark, or siphoned
off, that it never hits the lit exchanges, and there is just a lot less in
the way of trading opportunities," said Mark Gorton, CEO of high frequency
trading firm Tower Research Capital LLC.
In an attempt to win back some of the retail orders, exchanges such as
IntercontinentalExchange Group's (ICE) New York Stock Exchange, Nasdaq OMX
Group (NDAQ), and BATS Global Markets, have allowed brokerages to place dark
pool-style orders on their platforms, with the trade hidden until after it
is executed. NYSE, Nasdaq, and BATS declined to comment.
There is no doubt that trading costs on U.S. markets are low, and that
retail investors get a better deal than they did two decades ago. But U.S.
and global trading transaction costs have actually been rising for the past
two years, according to a Credit Suisse report on February 20. That may
suggest the benefits from off-exchange trading are no longer accruing to
investors as much as they previously did.
TRADE SECRECY
A major concern with off-exchange trading is that brokers who internalize
trades and offer dark pools do not provide any data to the market before the
trade is executed. On a stock exchange, when an order is sent in, the price
of the stock is adjusted and everyone with a data feed sees it.
Dark pools only report data after a trade has occurred. At that stage,
information about the trade has little influence on the price.
The pools were originally created for institutions to trade large blocks of
stock without creating a large impact in the market. If an order of 1
million shares was tracked, people on the other side of the trade could
quickly jack up prices and the original investor could easily pay more than
expected.
But much of the trading isn't like that now - the average size of orders in
dark pools has shrunk to around 200 shares, similar to levels on public
exchanges.
"There are potential costs from this trend of having more and more trading
being traded away from exchanges," said the CFA's Preece.
IEX, a new trading platform heralded in Lewis's "Flash Boys" as a fairer
place to trade, aims to become an exchange once it gains more volume, but is
currently a dark pool. Its average order size is around 750 shares.
"If the shift becomes too egregious to off-exchange markets, then there are
no lit exchanges to price against," said Brad Katsuyama, CEO of IEX. "I don'
t know if we are necessarily at the imbalance yet," he said.
Preece released a study on off-exchange trading in November that showed that
once more than half of the trading volume in a particular security is done
on dark venues, the ability to properly price that security becomes
difficult. The price discovery process can begin to erode when off-exchange
trading in a security surpasses as little as 10 percent, according to a
study by Carole Comerton-Forde and Talis Putnins of the University of
Melbourne.
Regulators in Canada and Australia have taken steps to curb the growth of
dark trading in recent years by requiring, for instance, that off-exchange
trades be of a minimum size or have a significantly better price than can be
found on an exchange. Authorities in Europe and Hong Kong are eying similar
rules.
"Observing some of the trends in U.S. markets and elsewhere and seeing that
dark trading activity in Canada was slowly growing we felt that we wanted to
put some very important principles in place," said Wendy Rudd, head of
market regulation at the Investment Industry Regulatory Organization of
Canada.