High frequency share trading, which allows traders to transmit millions of
sales at lighting speed is to be investigated by the Financial Services
The FSA is to review the UK equity markets and will look at high frequency
trading, also known as ‘dark pooling’ and alternative trading platforms.
The biggest concern regarding dark pooling, is that it allows large amounts
of shares to be traded with the prices not publicly posted until after the trade
is completed, raising issues of transparency the
Dark pooling is a computerised trading system that completes huge volumes of
rapid sale and purchases of shares and is estimated to be worth billions in the
US markets as it equates to approximately half of all trading.
The investigation team at the FSA is to include trading and equity markets
expert Henry Knapman who is on a secondment to the authority from Swiss bank UBS
until early next year.
The authority said in a statement: ‘We are talking to people in the market
about market structure. It’s not an investigation as such, it’s just using
market contacts to find out what’s going on.’
It added that the task was ‘information gathering’ and there is not expected
to be a formal report.
The US Securities and Exchange Commission has also launched an investigation
into dark pooling earlier this year as further questions are raised over the
possible affects sophisticated electronic trading systems have on investors.
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