Project Turquoise gets thumbs up
May 25, 2007
Dark liquidity on the way in Europe
LONDON - - It has been confirmed that Project Turquoise will allow trading to occur both publicly and via dark pools. Dark liquidity platforms, already fully present in the US, facilitate the buying and selling of securities without being listed on a stock exchange. Recent analysis by the Tabb Group indicates that such dark liquidity pools already account for some 10 percent of all US equity dealing volume.
Phillip Hylander, co-head of European equities at Goldman Sachs, elaborated on the alternative trading system (ATS) being launched by seven investment banking giants at the Exchange Forum, currently taking place in London. 'Turquoise is to be a hybrid incorporating a public order book and a non-public order book,' he explained.
New evidence has come to light indicating that UK analysts are generally in favor of Project Turquoise. IR magazine's Investor Perception Study, UK 2007/2008 reveals that 40 percent of the 400 sell-side analysts, buy-side analysts and portfolio managers questioned in the survey are amenable to the ATS. 'The London Stock Exchange (LSE) doesn't have a God-given right to be the only one, so bring it on,' commented one analyst. Only 22 percent of respondents believe ATSs pose a threat, while the remaining 38% were unsure or felt unable to comment.
This positive feedback contrasts with fears expressed by stock market representatives. Clara Furse, CEO of the LSE, recently launched a stinging attack on Project Turquoise, claiming instigators were self-interested and fragmenting trading could do the market more harm than good.
NYSE spokesperson Christiaan Brakman thinks Turquoise trading platforms would not be good for the public market as 'they would take liquidity, which would otherwise be in the public market, to a private area.'
The advent of the Markets and Financial Instruments Directive (MIFID) will better facilitate trading away from public stock exchanges. Mifid, effective from November 1, obliges fund managers to look at all sources of liquidity.
by Fay Sanders