Changes in the Stock Exchange Market - Dark and Visible Trading
By Hans Bool
While stock market activity (trading) is slowing down which is felt by companies like the Deutsche Boerse and the NYSE Euronext, new trading platforms silently enter the market scene.
Chi-X is a relatively new company that offers stock trading and exchange according to their own information at a lower price, and higher execution times.. But for the last I wonder whether this is related to the size of the platform; more users will decrease the performance of the platform. I guess. At this moment their share of trade for instance on AEX shares is less than 20%.
Turquoise is another trading platform that was initiated by a group of investment banks. And this is where we may expect a problem; dark trading. This is (block) trading where the name already suggests that small investors are not aware off.
A normal order book shows what the limit order are at either side of the market and this give the investor some idea of what is going on. But if there is another (dark) book where the real large orders are administrated than the small investor will loose valuable information.
Competition in the trading market is fair and reasonable. But what happens when investment banks - the few of them that are still alive - setup their own trading infrastructure and large amounts of trading shifts to these places?
First of all the private, retail client will be affected as they will be less informed about market movements. The larger traders will have a competitive advantage over the smaller traders.
We come from a situation where market research and information became accessible to the private traders, but it seems that we are going to a situation of charged and level services where those who pay extra are better informed.
For what it is worth. The question is and this has shown valid over the last month is that the professional investor aren't that professional after all.
What is evident is that the situation on the stock exchanges is changing and a first impression is that transparency is at stake.
© 2009 Hans Bool
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