Trading in the dark just got a lot brighter. And more transparent too.
Block trading venue Liquidnet has announced that it will post its form ATS charter on its website for all to examine. Also, the venue has met with 4/5 of its clients, reviewed and confirmed the users transparency controls.
The move comes amid criticism surrounding dark pools and their up-to-now opaqueness when it comes to how they operate and what protections and/or benefits they offer investors compared to lit or public exchanges. Part of the debate stems from the recent Michael Lewis book Flash Boys, which talked about the flaws in the current market structure and how a large degree of trading occurs in dark pools.
Liquidnets reported that it had met with nearly 80 percent of its trading partners in face-to-face meetings and members confirmed their trading settings. The firm announced this new settings and control system initiative, Transparency Control, back in October 2013. According to Liquidnet, this technology gives buyside traders and trading desks at 740 of the worlds leading asset management firms ultimate control over the liquidity they can access and how their data is used when trading through Liquidnet. The system continues to be rolled out among other clients.
In recent weeks, we have seen a growing chorus of industry participants, market analysts, and policymakers highlight the importance of transparency and we couldnt agree more. We believe that transparency is a continuous process and cannot be achieved by a single, one shot solution, commented John Kelly, chief operating officer, Liquidnet. That is why we have spent significant time and resources creating technology that enhances the level of transparency and control that our Members have when they trade with Liquidnet. These controls have allowed us to systemize an industry leading approach to transparency. It was an enormous effort throughout our company to create this technology and then to roll it out to Members globally. The response has been extremely positive.
Liquidnet introduced Transparency Controls gives traders access to a web-based portal where they can both monitor and manage the liquidity sources they interact with and the Liquidnet products and services in which their data is included. Once the trader or trading desk has confirmed its Transparency Controls settings, the system conveys those choices directly into Liquidnets back-office databases where they are automatically applied and stored. The system is dynamic, allowing traders to easily change settings based on their trading strategies and goals.
In addition to Transparency Controls and plans to make its Form ATS filing available to the public via its website, Liquidnet has also implemented several transparency and disclosure initiatives to ensure that traders understand all aspects of Liquidnets business, procedures and processes.
First is Liquidnet Trading Rules. Liquidnets Trading Rules is a comprehensive document that describes how Liquidnets trading system works globally and has been provided to Members since 2001. These Trading Rules are submitted to the SEC in the U.S. in conjunction with Liquidnets Form ATS. This document is available to Liquidnet Members and Customers on a secure Member website and updates are communicated regularly via e-mail to Members and Customers.
Also, the venue is promoting member site visits. Upon request, Liquidnet provides its members and clients with a first-hand, on-site overview of its operations and procedures. These visits are customized to each Members needs.
Lastly, the ATS created at working group whos goal was to oversee application and promotion of the venues guiding principles on transparency and disclosure. This group advises Liquidnet employees and business areas on these principles to ensure that they are being fully adhered to.