In the wake of a settlement with the Securities and Exchange Commission in early October, the number of shares traded in the Level ATS dark pool operated by eBX LLC dropped by more than half, according to a recent report.
In its monthly “Let There Be Light” report on activity in dark pools, Rosenblatt Securities noted that volume at Level ATS was 19 million single-counted shares in October, down from 41 million in September. That’s a drop of 53.7 percent.
On October 3, eBX agreed to pay the SEC a fine of $800,000 to settle charges that it failed to protect customers’ confidential trading information and failed to disclose that it engaged an outside firm to use that information. Specifically, the SEC alleged that customer order information was held in the memory banks of a Citigroup-owned smart order routing system and used to make routing decisions.
Following the SEC’s announcement of the settlement, several customers stopped sending their orders into the LeveL dark pool. In October, LeveL chief executive Whit Conary told Traders Magazine that a quarter of its customers had stopped sending their flow to the dark pool.
The drop in volume at LeveL may partly be due to the way it arrives, according to the Rosenblatt report. Institutional brokers typically funnel multiple customers’ orders into LeveL through one pipe. In some cases, if only one of those buyside customers requests that the broker not send their flow to LeveL, the broker must divert all of its flow away from LeveL, Rosenblatt explained.
Rosenblatt reports that some large brokers have been reconnecting to LeveL recently, “meaning that volumes may start to rebound through December and into early next year.”
LeveL chief executive Whit Conary declined comment.
The firm stopped publishing the daily volume on its trading system to its Twitter feed on October 3.
“We’ve received tremendous customer support,” Conary told Traders Magazine, in late October. “And we’re here for the long term.”
