Dark Pools Governance Rules Also Dark, Says Nasdaq CEO Greifeld

(Bloomberg) — Nasdaq Chief Executive Officer BobGreifeldsays governance of dark pools is still too murky.

The trading pools, which keep demand private and only publicly disclose executed trades, still dont have enough transparency in their rules,Greifeldsaid in a talk withTIAA- CREF CEO Roger Ferguson onrisks and weakness in U.S. market structure at the Bloomberg Markets Most Influential Summit in New York.

The customers dont know whos in the dark pool,” saidGreifeld. They dont know what the rules of engagement are.”

Dark pools make up almost one-fifth of trading in the $23 trillion U.S. equities market. The primary advantage of these private trading venues,Greifeldsaid, is to enable investors to make large orders without markets moving against them.

The controversy with dark pools right now is not so much the trading per se, but the fact the governance is dark,” saidGreifeld, who oversees the largest U.S. stock exchange.

Last years publication of Michael Lewiss book “Flash Boys,” drew greater public attention to dark pools and high- frequency trading firms, which use computing power to run hundreds of trades in fractions of a second. Regulators, meanwhile, have investigated the industry, with the U.S. Securities and Exchange Commission setting new records in fines for illegal dark pool activity. In August, Investment Technology Group Inc. said it would pay$20.3 million for allegedly using a secret proprietary trading desk to trade against customer requests.

ThoughGreifeldsaid there are problems with the lack of transparency around dark pool rules, hes no fan of “Flash Boys” either, which he said did not include adequate interviews with industry players.

It was storytelling,” he said.