LONDON: The volume of European shares traded privately rather than on a public exchange jumped 35 percent year-on-year to a record high in the last six months, despite regulators’ efforts to make markets more transparent in the wake of the financial crisis.
Trading infrastructure provider Fidessa said yesterday that the total value of so-called dark trading rose 45 percent to ¤207bn ($279bn) in the second and third quarters, compared with ¤143bn in the same period last year.
However, that is still well below the ¤4.67 trillion estimated to have been traded on exchanges such as the London Stock Exchange over the same period.
Dark trading is conducted on electronic networks that allow investors to buy and sell stocks anonymously, in private deals so other shareholders are not aware of the trades. Some of the details are made public but only after the market has closed.
They are typically used by large fund managers and banks that regularly trade large volumes of stocks.
Critics say dark trading drains liquidity from public exchanges, making it harder for other investors to value stocks accurately, while proponents say the competition they provide helps to reduce the cost of trading on exchanges.
The number of companies whose stocks were used in dark trades rose by just 2 percent, meaning the growth in value stemmed from more of the same stocks being traded, Fidessa said.
A Fidessa league table showed Swiss bank UBS’s MTF — multilateral trading facility — ranked first in terms of value of dark trades, followed closely by BATS Chi-X Europe’s CXE and DXE.
The most heavily traded stocks were among Europe’s most liquid, the data showed. Vodafone ranked first, Switzerland’s Nestle second and drugmaker Sanofi third. Dark trading counted for between 4.7 percent and 8 percent of the total value of trades for these stocks.
More than one third of Europe’s dark trading occurred in Britain, while France and Germany each counted for around 14 percent, Fidessa said.