Call it the “Flash Boys” effect.
With all the hubbub after the Michael Lewis tome about off exchange trading and how it’s purported to hurt the market, dark pools in April saw some volume, 1 percent, slip away. This comes amid a larger industry-wide volume slump of 4 percent during the month, according to TABB Group’s April Equities Liquidity Matrix report.
However, industry-wide volume is actually up 4 percent year-over-year.
This compares to March’s report where U.S. dark pool volume was flat while overall trading volume was down slightly. At that time, TABB reported industry ADV was 6.9 billion shares in March compared to 7.0 billion shares in February.
The drop in dark volume comes amid several developments during the report period, the consultancy noted. First, FINRA’s rule 4552 became effective May 12th, requiring ATSs to report their trading volumes. The reports are due to FINRA seven business days after the end of each week, or May 28th for the first week. FINRA plans on publishing on a 2-week delayed basis for Tier 1 NMS stocks and a 4-week delayed basis for all other NMS stocks.
In conjunction with the mandatory reporting edict, IEX, ITG, KCG and Liquidnet all have announced that their FORM ATSs are or will be posted on their respective websites. This signals a marked shift in transparency in the marketplace, the consultancy noted.
Other notable happenings within the month were the National Stock Exchange (NSX) petition it filed with the SEC for approval to cease trading as of May 30th, 2014, pending a change in volume. In April 2014, NSX made up .2 percent of industry market share, down from approximately .6% in January 2014 and an average of .4 percent for 2013.
NSX’s departure, TABB noted, comes on the heels of the CBOE Stock Exchange halting its trading operations on April 30, 2014 and LavaFlow ECN migrating its ‘top-of-book’ order flow from NSX to the FINRA ADF in February 2014.