The Impact of Dark Pools on Access to Desirable Liquidity

 
Aggregated Liquidity
One major consideration when using dark pools is whether you go in under your own name or under that of an aggregator and what are the benefits or costs of each approach. When entering a dark pool under an aggregator’s name, then, obviously, no one at the broker knows who you are regardless of whether they are sitting in the dark pool. However, you need to consider if you go into a dark pool in your own right, if that will afford you any differing treatment, and the cost benefit of that needs to be considered.
In terms of developing systems, we have done a lot globally. In New York, we have worked to build aggregators in a very fragmented market. We use dark pools now but we need to consider how we go about aggregating them effectively.
Other costs that need to be taken into account include the tiering system, how many pools we access and the cost of accessing the pools via an aggregator as opposed to directly. In addition, we need to look at how an aggregator’s smart order router works. Does it just sit there passively or is it actively moving orders around, cutting from one pool and placing them in another? How is it prioritizing orders?
Market Structure Changes and Access to Liquidity in India and Australia
Many people have pulled out of India due to the uncertain tax regime and that issue has taken the spotlight ahead of market structure changes.
In Australia, I think market structure changes just mean that people have had to be smarter about the way that they trade. You can’t just passively place an order. You have to make active trading decisions. You’re going to be considering the block trade, the dark pool, the algorithm, before you pass it off and put it into a central limit order book.
Algorithms
We have made some changes to the way that traders access algorithms and the way we choose algorithms we participate in. I do believe that there is a natural level of how many orders fit the criteria to make them suitable for that type of trading.