UBS plans regulated, centrally cleared dark pool

* UBS MTF to kick off after it obtains FSA approval

* 1st broker-owned dark MTF to offer central clearing

* Designed to widen liquidity options available to clients

LONDON, March 9 (Reuters) - Swiss bank UBS plans to launch a regulated European "dark pool" share trading facility to create another source of liquidity for its clients.

Dark pools enable would-be buyers and sellers of large orders to avoid revealing pre-trade information and signalling their intentions to the rest of the market.

The new pan-European dark multilateral trading facility (MTF), which would be open to all market players and provide immediate post-trade data, will start business once the UK Financial Service Authority gives the green light, UBS (UBSN.VX) said on Tuesday.

"This is a mechanism by which we are widening the liquidity available to clients," said Robert Barnes, UBS managing director, in an interview.

It will be the second European broker-owned dark MTF to launch after Nomura's NX (8604.T) and the first to provide for central clearing. That will enable clients to reduce exposure to UBS counterparty risk and possibly to reduce settlement costs by netting trades at the clearer.

Stock exchange officials charge that investment banks' internal dark pools are functioning like MTFs without being subject to the same rules on pricing and post-trade transparency under EU regulation. [ID:nGEE5B31GV]

UBS will continue to handle client orders as it does today, with some internal matching and by routing to a variety of external pools of liquidity including exchanges and MTFs, Barnes said.

UBS will treat the new MTF as an additional external source of liquidity, Barnes said. It will have segregated management and supervision and be separated from the bank's other trading desks to ensure information on MTF trades is kept confidential.

UBS MTF will aim to attract other brokers or traders, setting down clear criteria for membership, he said.

Shares will trade on UBS MTF at the mid-point prices on the primary market at that time, and trades will be reported real time to Markit BOAT but attributed to UBS MTF, with the two parties remaining anonymous, the bank said.

Dark MTFs accounted for little more than 1 percent of all European equity trading in February, including OTC markets, Thomson Reuters data shows.

Nomura officials have said they expect MTF status to boost their NX dark pool by allowing other players to trade. Since it became an MTF in late January, NX has attracted other brokers including Credit Suisse, Instinet and ITG to connect, Nomura officials said at a recent press briefing.

NX, was the fourth-largest of 11 dark MTFs in Europe in February. It accounted for 1.52 billion euros in trades, according to Thomson Reuters data, including hidden orders on transparent MTFs.

Even taking into account banks' internal networks, dark pools amount to no more than 4 percent of the total volume of trading in Europe, bankers say, citing statistics from a recent report by the Tabb consultancy.