I wrote earlier this week about Financial Transaction Taxes and why the regulators’ ‘rationale’ for these taxes is either misplaced or disingenuous. An even more extreme example, however, was pointed out to me the other day concerning that other controversial topic, dark pool trading. As part of our regular analysis we pointed out that European dark pool trading had grown significantly. Naturally those on the anti-dark pool side of the water have leapt on this as ‘proof’ that this evil menace must be stamped out, etc, etc…

It’s a shame that they don’t understand the context (or maybe they do, but have a politicised motive for pretending they don’t). First, MTF/exchange dark pool trading is still only a fraction of the total European market at around 3%. Second, it has grown in line with a general increase in institutional volume from a very low point during the first 6 months of 2012. Interestingly, this growth has been masked by a corresponding decrease in HFT. Third, who said dark pool trading was bad anyway?

Regulators only have themselves to blame as they introduced a whole bunch of changes to market structure – without a corresponding and neutral way to measure their impact. For me this is the biggest threat to market integrity.