Dark pool trading volume dropped 13 percent in May, according to a study from the Tabb Group.
Dark pool’s trading volume dropped in May
The large drop in May comes after a slight 1 percent drop in April, according to Tabb’s “May 2014 Equities LiquidityMatrix.”
“It’s not unusual to see a larger drop in volume for the summer months, but May is a little early for that to start,” said Valarie Bogard, the Tabb Group research analysist to authored the report. “This drop is likely at least partially due to the very low volatility in the market during May.” The report noted May’s average close for the VIX was 12.5, the lowest monthly average since February 2007.
Could the steady drop in volume be due in part to the publishing of the book Flash Boys and the controversy surrounding high frequency trading? This is difficult to determine at this point, according to separate sources. But pressure is said to be mounting. The disclosure of fraud charges against Barclays and its dark pool operations is said to be reverberating. Particularly alarming, sources indicate, is how the bank is alleged to have deceived investors in documents and then fired an employee who refused to comply with the fraud, as previously reported in ValueWalk.
Impact of fraud charges on dark pool trading activity
Eyes will be on the June report to better gauge the dark pool activity as the impact of the fraud charges against Barclays PLC (NYSE:BCS) LON:BARC) will be reflective at that point, one particular emphasis on the relative drop in exchange trading versus dark pool trading. In May dark pool trading dropped the same as did overall exchange volume.
In the May report Barclays PLC (NYSE:BCS) LON:BARC) was the top Tabb reported dark pool, garnering an average of 95 million daily shares of stock traded. UBS lagged in second with 84 million average daily share volume. The Morgan Stanley and Citadel dark pools followed in volume with IEX, the trading venue featured in the “good guy” in Michael Lewis’s book Flash Boys, finds itself in eleventh place with just 31 million in average daily share volume.
Goldman Sachs Sigma X dark pool, which is said to be for sale, posted 54 million in average daily share volume. Goldman Sachs Group Inc (NYSE:GS) was recently fined $800,000 for a fine related to pricing errors over an eight day period of time in 2011, according to a report.