The International Organisation of Securities Commissions (IOSCO) has published its principles for the global dark pool community, which highlights the high degree of disparity across the post-trade data environment for these venues. In particular, it notes the lack of a common venue identification standard and trade reporting processes.
IOSCO, which has also been working on data standards for the OTC derivatives market, indicates that the timing of the publication of trade data from dark pools (including volume, symbol, price, time and in some jurisdictions, marketplace identifier) is generally required “immediately”, regardless of jurisdiction (with some deferrals for large transactions permitted in certain markets). However, the data itself is far from standard across regions and individual jurisdictions, neither is its manner of dissemination to the market.
In some jurisdictions this data is provided to the market at large by the national exchange, such as in Australia, whereas in others it is disseminated over the web, or via data vendors, or via a central regulatory body, such as the Financial Industry Regulatory Authority (Finra) in the US. Moreover, in Europe, under MiFID, all trades executed on a dark pool are required to be made public by the actual operator of the dark pool in real-time.
IOSCO highlights the range of information that is made available, with only some markets providing venue IDs: “In one jurisdiction, exchange trade information is disseminated to the public, although actual dark pool volumes are not released to the public. In Canada, the public is provided with information about trades executed on dark pools, which includes the specific identifier of the platform. In the EU, where a dark pool is operated by a dedicated dark pool platform, the publication of trades executed on that dark pool includes the specific identifier of the platform. In the United States, all trades (including volume) are made public, although the specific venue identifier for OTC trades is reported only to Finra.”
In terms of reporting trade information to the national regulator, some countries allow quarterly reporting, whereas others require it in real time. This disparity and the others related to a lack of standardisation of data such as identifiers is noted as a potential concern by the report. In particular: “the impact on the price discovery process where there is a substantial number of dark orders and/or orders submitted into dark pools which may or may not be published; the impact of potential fragmentation on information and liquidity searches; and the impact on market integrity due to possible differences in access to markets and information.”
IOSCO therefore stresses the importance of increased standardisation of data formats for these trading venues in order to provide increased transparency and solid audit trails. On the subject of venue IDs, it states: “The Technical Committee notes that dark pools in many jurisdictions are already required to publicly disclose information about executed trades. This information does not, however, necessarily identify the trading venue on which the trade was executed. Regulators should consider whether it is appropriate to require the identity of the dark pool operator to be revealed and, if so, how.”
It also considers the potential for a consolidated tape of this data and general trade data to cover all trading venues: “In this context, clear reporting rules and standards, including certainty about which party to a trade should report the trade, may assist regulators in ensuring post-trade information is accurate, complete and comparable. In addition, regulators should consider the benefits of having a consolidated tape to report all trades from all venues, both lit and dark.”
At the very least, these recommendations will spur further debate within the regulatory community about identification standards for these venues and wider data standardisation going forward. Given their role at the moment in many markets, any decisions at the global level will impact the data vendor community servicing these markets significantly.