NYSE CEO Duncan Niederauer Says Dark Pools Disadvantage The Retail Investor, Then Launches Own Dark Pool

This actually isn’t a post about dark pools. I’ve already written more than one post about dark pools – several years ago in fact, and I’d recommend them as background reading on the subject.  This post, however, is about the NYSE’s delightful hypocrisy / flip-flopping.

On Wednesday, July 4th, NYSE CEO Duncan Niederauer penned a Financial Times Op-ed about dark pools.   Cliff notes: dark pools are bad.

Fast forward to Friday, July 6th: “Regulators Approve NYSE Plan For Its Own Dark Pool.”  Cliff notes:  We’re opening our own dark pool.


So when Niederauer wrote that FT Op-ed about how dark pools disadvantaged the poor retail investor, what he really meant is that it diverted flow away from his exchange and disadvantaged his exchange.   Remedy?  Get a piece of the action!  Don’t hate the playa, hate the game, right Duncan?

For the record, I don’t think dark pools disadvantage retail investors, and I think that it’s essential for investors and traders to realize that dark pools are the antidote to the high frequency traders that many spend so much time complaining about.  As I’ve written previously, I think the perfect market structure would actually be “dark,” where bids and offers weren’t displayed – or certainly bid and offer sizes weren’t displayed – let participants trade off of their own determination of “value,” not react to other traders’ bids and offers.


Niederauer’s FT Op-Ed: “It’s Time To Bring Dark Pools Into the Daylight

WSJ: NYSE Gets Its Very Own Dark Pool

NYT Dealbook: Regulators Approve NYSE Plans For Its Own Dark Pool

Kid Dynamite: Dark Pools Are Not Scary, Shady Places That Rip Off Average Investors

Kid Dynamite: Calling Out Matt Taibbi on Dark Pools


disclosure: no positions in $NYX, $NDAQ, $ETFC

ps – from an expert in electronic trading, on the NYSE’s new plan, via email:

I don’t think it will help retail investors, and I don’t think ultimately it will work (most retail order routers don’t have the ability to avail themselves of the RLP facility as their routers aren’t sophisticated enough, and those that do have strong relationships with wholesalers).

I think the NYSE asked for this capability mainly to make a point and set the tone/direction that they need the ability to compete with the broker-dealer model.
I’ve stated publicly that I don’t see it working.
Worse, it basically allows for sub-penny quotes by indicating on the NYSE data-feed that a quote exists better than the displayed quote, possibly in increments less than a penny…




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