LONDON, Sept 6 (Reuters) - A group of asset managers and banks are trying to cut the cost of “dark pool”, or anonymous, trading in big blocks of shares via a deal with a London Stock Exchange Group unit.
Dark pools, whose transactions are only revealed once they are completed to avoid unduly moving prices, have come under scrutiny from regulators who want more transparency in trading.
Plato Partnership, which includes Citigroup, Goldman Sachs, AXA Investment Managers and Franklin Templeton, said it has signed the co-operation agreement with the LSE unit, Turquoise.
Turquoise is 51 percent owned by the London exchange and trades shares across 19 European countries. The rest of Turquoise is held by 12 investment banks, some of whom also back Plato.
“Plato Partnership’s key aims remain to reduce trading costs, simplify market structure and act as a champion for end investors,” Plato said in a statement on Tuesday.
The cooperation agreement coincides with a planned merger of the London exchange and Deutsche Boerse.
Britain is also due to leave the European Union and Turquoise currently uses a “passport” under the bloc’s rules to offer cross-border share trading. LSE Group has operations in EU member Italy which could potentially be used as another base if Britain lost its passporting rights.
No equity stakes are involved in the Plato-Turquoise agreement. Buy-side firms will help shape the development of Turquoise’s dark pool services.
The main focus is on Turquoise’s “midpoint dark order book” which handles trades worth over 250,000 euros ($279,000). It will be renamed Turquoise Plato.
The EU will implement new curbs on dark pool trading from January 2018 but such large trades will benefit from exemptions.
The new venture brings together for the first time the “buy-side”, or funds who invest in shares, the “sell-side” banks who channel share orders, and a trading platform which executes those orders, Plato said.
Turquoise’s non-dark or lit trading service is not part of the deal.
Dark pools have been accused of favouring some investors like high-speed traders, over other customers.
But Plato said the new platform will seek to ensure “the protection of orders with the goal of ensuring fairness for all participants”. ($1 = 0.8974 euros) (Reporting by Huw Jones)