Technology, trading and investor relations

It is a moment many an IR person dreads. A significant number of shares have changed hands overnight, and the FD wants to know why. Unfortunately, there are an increasing number of occasions when the technology has hidden the reason – or even the transaction – from view.
The good news is this may be about to change, following 2 announcements this week.

First, dark pools. Or more properly, multi lateral trading facilities. Dark pools of liquidity are crossing networks that provide liquidity that is not displayed on order books. They offer institutional investors many of the efficiencies associated with trading on the exchanges’ public limit order books but without showing their hands to others. Neither the price nor the identity of the trading company is displayed.

In new developments in dark pools. regulators have said this week that they will look into what Mary Schapiro, SEC Chairman, describes are “the potential investor protection and market integrity concerns raised by dark pools”. The European Commission is also looking into whether more disclosure around these trades should be required. However new platforms continue to arrive. BATS – a major player in the US - has unveiled plans to launch a pan-European dark pool, competing with the growing number of services launched by traditional stock exchanges.

Also in the US, NYSE and Liquidnet announced a cooperation that will allow NYSE-listed companies to see the ratio of intended buy orders against intended sell orders. This should help companies to react more effectively to developments that may be moving their share price - such as market rumours - by analysing buy and sell trends on the stock in the dark pool.

And almost inevitably, Twitter has found its way into trading systems. US-based technology firm StreamBase has announced the capability to monitor "tweets" for price sensitive information, and turn them into buy/sell orders to be executed through algorithmic trading systems.

All of which causes this old timer, who remembers blue buttons and jobbers, to shake his head in wonderment.