Jan 19 (Reuters) - Fidelity Investments and eight other big money managers have formed a consortium to launch a so-called dark pool, an anonymous venue for equities trades, according to a source familiar with the matter.
The new effort, initially spearheaded by Fidelity, aims to create a private trading venue for the benefit of mutual fund shareholders, to be run at little to no profit. Every member is expected to have a seat on the board of directors, the source said.
The project could launch within days, with trading to start later in 2015, the source said. The Wall Street Journal and Financial Times reported the new project earlier on Monday.
Among other money managers participating in the venture are BlackRock Inc., Bank of New York Mellon Corp., J.P. Morgan Chase & Co. and T. Rowe Price Group Inc.
Dark pools are facing rising costs amid increased regulatory scrutiny because of concerns that they are too opaque.
In June, the New York attorney general sued Barclays, accusing the bank of misleading clients in its dark pool. That same month, dark pool operator Liquidnet agreed to pay the Securities and Exchange Commission $2 million to settle charges that it improperly used its subscribers’ confidential trading information to market its services. And in July, Goldman Sachs agreed to pay an $800,000 fine over pricing violations in its dark pool.
Nonetheless, at least two U.S. exchanges have also been in talks with big banks about possibly taking over the operation of the banks’ dark pools.
Both BATS Global Markets and Nasdaq OMX Group NDAQ.O recently said they have held talks with banks on outsourcing some or all of their dark pool operations.
“It does appear as though there are additional regulatory costs and obligations coming for dark pools and some dark pool operators may find that it’s just not worth it,” Joseph Ratterman, chief executive of BATS Global Markets, said in a recent interview. (Reporting by Hilary Russ in New York; Editing by Diane Craft)