With the final ATS registered under the new dark pool rules in October, the SEC might like to take a moment to reflect on the 1986 college basketball season.
That year, the NCAA Committee decided that all shots made 19 feet 9 inches from the basket would count as three points. Designed to open up play, the decision was initially met with the enthusiasm of a root canal by most except for a second-year coach from a small New England university. That season, Rick Pitino of Providence College took a team he initially lamented as “extremely mediocre athletically and physically” all the way to the Final Four by designing an offense that took double the number of three-point attempts as their opponents.
The Rules Committee achieved their goal of open play, but the game was also transformed. Types of players recruited, offensive/defensive strategy, coaching, substitutions, etc. (not to mention Pitino’s future earnings potential). Three decades later, many believe that the three-point arc was the most significant rule change in the history of college basketball.
Since 1998, the SEC has implemented a half dozen dark pool rule changes culminating this fall with Form ATS-N. History has shown us that each new ATS regulation has altered the landscape of dark pool trading, often influencing both the number and types of venues available. Additionally, the workload required to comply with Form ATS-N likely sets the barrier to entry much higher for future entrants. And as traders, quants, and compliance begin their review of each detailed Form ATS-N, dark pool operators should anticipate a renewed reshuffling of flow across their pools based on how their filings are interpreted.
To learn more about the unintended consequences of dark pool rules and what future may be in store for these venues, click here for Liquidnet’s report “From Beginning to “N”: What the History of Regulations From Reg ATS to Form ATS-N Tells Us About the Future of Dark Pools”