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Elaine Wah

Modern Markets, Modern Metrics - A Blog By IEX

In this blog by IEX's Elaine Wah, the newest public exchange looks to refute public claims that the metrics it uses are designed to inflate its own volume numbers and mislead people.

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November 11, 2008

Dark-Pool Club Members Revealed

By Nina Mehta

Traders and other industry pros have wondered for the last couple of years how many dark pools are out there. Now they know. There are around 32. They make up nearly half the list of 68 alternative trading systems in the United States, most of which are in equities. The Securities and Exchange Commission released a list of ATSs that are "active filers" in late September.

In addition to ITG's POSIT Match, Liquidnet and Pipeline, the big pools from Goldman Sachs, Credit Suisse, UBS, Morgan Stanley and others are on the SEC's roster. The bare-bones list includes the date of initial filing and the geographic location of the ATS filer, but has no volume information.

GETCO Execution Services, a new broker owned by GETCO, has a dark pool that registered in February. According to a recent report by Rosenblatt Securities, GETCO Execution Services, which opened for trading in March, executed 47 million shares in July (single-counted). That places the pool among the bigger dark venues.

In addition, Chicago-based TD Professional Execution has had a dark pool since 2006. Several ATSs could not be identified, including one called Real Time, formed in 2006, and another called XE, established this past May. Another called DEEP ATS, owned by DEEP Liquidity in Houston, registered in 2006 but is not believed to have been launched.

The most popular year for ATS registrations in the equities arena appears to have been 2007, with nine filings. That was followed by 2006, with eight. Thirteen firms registered as ATSs from 1999 through 2005. Just two did so this year.

The SEC released this list in response to a Freedom of Information Act request. The regulator did not indicate who made the request. Research firm TABB Group had talked about submitting an FOIA request for information about SEC-registered ATSs, but never went through the formal request process.

"It's a nice gesture by the SEC to publish what they consider a consolidated listing, but other than telling us where the parent company resides, it reveals very little about each individual offering," said Matt Simon, an analyst at TABB.

ATSs are defined by the SEC as non-exchange systems that bring buyers and sellers together to enable the continuous electronic trading of securities.

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ATSs are considered market centers and must be registered broker-dealers. The club includes dark pools, ECNs, bond trading platforms and several systems to trade commodities. About a dozen of the names on the SEC's list are in the fixed-income arena.

Another half-dozen or so are ECNs. The ECN portion still includes ArcaEdge and BATS Trading, both of which are now exchanges. The list also includes a new ECN called MAPS. The ATS, which registered with the SEC in late August, is based in New York, although no additional information is provided. Several market participants contacted did not know of the ECN, which has not yet launched or announced its plans.

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