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8/18/2010

The financial industry getting darker

With more big players coming here to operate dark pool electronic trading, the activities in the finance industry will surely get darker. Dark pool operations are against the merits of transparency. Ronald Arculli, chairman of Hong Kong Exchange said that ‘dark pools pose a “systemic risk” to financial markets because of their lack of transparency.’ However, when the industry practice is less then virtuous, playing in the dark side seems to be easier to accept. Many experts in US and Europe have cried out loud against this practice and have told of the dangers it presented. It is also unfair to the rest of the investors for not having such information and trading in the dark. It is no longer a level playing field when information is withheld by some parties. Stock exchanges that see it their responsibility to provide and level playing field and transparency need to re examine themselves and ask if they are violating the very principles and regulations that are supposed to uphold. Will dark pools turn out to be as toxic as toxic notes and mini bonds one day? Welcome to the dark side.

7 comments:

Wally Buffet said...

"Will dark pools turn out to be as toxic as toxic notes and mini bonds one day?"

Of course it will. The question is when.

When you mess about with the markets just to grab a chunk of business from institutional buyers or sellers with supposedly cost savings from the dark side as bait, transparency evaporates and hardly anyone save the parties concerned know what the f@#k is going on. Some will benefit big time while others will lose big time too.

We have just slightly recovered from the recent financial toxicity. Just leave it to the smart asses to come up with another perhaps more lethal poison disguised as a cost saver.

I agree with you that Stock Exchanges exist to level the playing field and to ensure transparency. Why they are abrogating this raison d'etre of their existence is beyond me.

Yup, welcome to the Dark Pool with murky black quicksand.

Anonymous said...

In this present world, the dark side controls all institutions, disguised as the savior of mankind, be it financially, morally, ecologically, spiritually and all embracing, but finally turning out doing all evil except saving mankind.

Think about it.

Anonymous said...

It is not a surprise that crooks and scoundrels are extending their dark operations in the business world and stock markets from the States to other so called democratic countries, countries which allow crooks and scoundrels to cheat and swindle with impunity. Who are the people in cahook with this dark pool operators? May be the MAS should make a stand on it and not claim ignorance of its toxic nature in future. The public needs to be protected from crooks and scoundrels operating in the garb of decent businessmen.

Matilah_Singapura said...

Aiyah, dark pools are of benefit to folks at the GIC and Temasek lah. Now they can buy shit on the quiet.

Wally and redbean:

I agree with you that Stock Exchanges exist to level the playing field and to ensure transparency.

Ever since the beginning, "transparency" is the last thing big players want. They want quick access to relevant info, and the opportunity to trade before anyone else catches on to what's going on.

Like freedom, transparency requires eternal vigilance and effort.

Anonymous said...

what about exchanges engaging in dark pools themselves? The regulators violating their own regulations...

Matilah_Singapura said...

Yes, with this kind of "capitalism", anything goes because the whole idea is to be "secretive" and not let anyone else know what you are doing.

The govt regulators have proven to be at best ineffective and at worse corrupt themselves. With dark pools opertating, the regulators themselves can engage in "invisible" deals all over the shop.

But of course this "secret" capitalism will destroy the price mechanism which is a vital signal supposed to reflec the true market value of an asset. Then no one will be able to make "predictions" -- even the dark poolers themselves. They will not know what the other dark pools are doing, who is bullshiting and hiding info...

...and of course it can get very interesting when the big buggers are trying to screw each other and no one trusts anyone.

I can't wait for the comedy to ensue. There'll be big players screaming "unfair!" when they themselves start screwing each other over.

Anonymous said...

Everyone is dark when the sun sets, that's the nature of man. We are all human and prone to do things in the dark, NATURALLY.