As the Securities and Exchange Commission alters the dark pool landscape, two more firms are throwing their hats into the ring to cross customer order flow through new dark pools.
OES MarketGroup and Pragma Securities both plan to launch non-displayed alternative trading systems in the first quarter of next year. The OES dark pool will be called ProSecurities, while the Pragma system will be known as ONECROSS.
OES, a routing broker that provides broker-dealer customers with access to market centers and routing services for exchanges, intends to launch ProSecurities in the first quarter of next year. The firm has 150 broker-dealer customers.
"We set up an ATS to give us the capability to match order flow going through our systems in addition to routing to exchanges, dark pools and other market centers," said Mike Barth, executive vice president in charge of strategic investments at OES. "We don’t plan to be a traditional ATS with liquidity providers and order flow from a lot of subscribers. We wanted to make our routing services more competitive by matching flow internal to our systems."
The dark pool could lower costs for clients. "The catalyst was to increase fill rates, reduce order response latencies, and reduce overall costs for our clients," Barth said. Firms that get executions in most dark pools typically pay less for those trades than they would to take liquidity from publicly displayed market centers.
Pragma Securities said the firm plans to launch ONECROSS sometime in the early part of the new year, according to a spokesperson. Pragma, an agency broker, provides algorithmic and quantitative trading services to institutional investors.
Pragma isn’t ready to provide details about how ONECROSS will operate and what types of flow it may seek to match, the spokesperson said. Weeden & Co., an institutional broker-dealer, is an investor in Pragma and one of Pragma’s execution partners.
These dark pools are preparing to launch as the SEC is changing some of the rules for venues that do not publicly display their quotes. The SEC last month proposed a set of rules designed to provide more transparency to the public. These rules would lower the volume threshold that triggers the public display of actionable indications of interest used by some dark pools. They would also require the real-time identification of where dark pool trades occur.
All ATSs print their trades to the tape as off-exchange executions, but the prints are not identified as occurring in specific pools. The SEC proposed an exception to this requirement for trades with a value of at least $200,000.
