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Dark pools draw trade away from stock exchanges in September

Dark pools, the anonymous trading venues at the center of a series of investigations by U.S. authorities, continued to gain equity trading at the expense of public exchanges in Europe last month, Thomson Reuters data showed.

Dark order books, which permit shares to be bought and sold without publicly informing the market until the trade is completed, accounted for 6.9 percent of total European stock trading last month, up from 6.4 percent the month before and 5.7 percent a year earlier.

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Around 53 billion euros ($66.95 billion) worth of shares changed hands in dark pools in September, up 20 percent from the previous month and 29 percent year on year. This compares with just 250 million euros in January 2008.

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Dark pool trading has been rising despite growing scrutiny by regulators, who are concerned that brokers and proprietary trading firms that use aggressive high-frequency trading strategies have an unfair advantage over other clients.

Since June, U.S. authorities have begun investigating dark pools operated by a number of European and U.S. banks, including Switzerland's UBS and the United States' Goldman Sachs.

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UBS Multilateral Trading Facility, BATS Chi-X Europe and Turquoise were responsible for roughly half of all orders executed on "dark" books last month.

Dark pools' share of total market turnover may still be small, but they have been growing faster than "lit" order bookswhere live trade data is publishedoperated by primary stock exchanges and various other firms.

Equity turnover on these "lit" order books rose 5 percent year on year in September to 714 billion euros, but it remains down from over a billion in 2008. Total turnover across dark and lit order books was up 7 percent last month to 767 billion euros.

Are dark pools drying up?
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Are dark pools drying up?