SEGMENTATION COSTING US INVESTORS BILLIONS
The U.S. market features approximately 300 different venues, including thirteen registered exchanges, forty or so active alternative trading systems (ATSs) and numerous broker-dealer platforms. The study, by Dr. Frank Hatheway, Dr. Hui Zheng and Dr. Amy Kwan, looks at U.S. trading venues with restricted access and without displayed orders – generically ‘dark pools’ – which increasingly segment order flow in the U.S. The study seeks to quantify the effect of dark pools on price discovery, and their impact on U.S. market quality. The authors show that the effects of order segmentation by dark venues are damaging overall price discovery and market quality.