With Alasdair Haynes, CEO, Aquis Exchange
Crossing networks play an enormously important part in market micro structure. They are where orders can be matched to each other and so reduce market impact. We believe the proposals to restrict dark flow would be a huge mistake and we are sure the regulator doesn’t deliberately intend to remove this very valuable part of the business. Natural crossing is something that brokers have been doing for hundreds of years and they should be able to continue.
There does appear to be a problem in the industry with regards to transparency. The market should be fair, inclusive, simple in nature and, of course, transparent. Transparency should be the main aim of anybody creating a market.
Transparency is particularly important with regard to price. There has been much discussion about the structure of exchanges and what is charged for trading. If you look at the pricing policies of many of the national exchanges, you see how complicated and difficult the pricing descriptions can be, which is hardly transparent.
We think subscription pricing is the solution. When the buy-side considers what they are paying for trading, the answer should be very simple – $X per month. This is good for both the buy-side and the sell-side. We think we can help expand the margins of the sell-side and that the buy-side will benefit too.
If dark pools have a simple process, are easily understood and try to match orders of size so as to reduce market impact, it can be hugely beneficial. We all know about the problems of maker/taker pricing and that there were issues from the buy-side who weren’t comfortable with it. There was no transparency and a duopoly in the market.
In general we believe the regulator likes the concept of subscription pricing because it is fair; a big user will pay more, a small user less. And subscriptions allow markets to grow without the complexity experienced under maker/taker pricing models.
We are not expecting the other exchanges to love us and what we do, but we do think we have good support from the buy-side and the sellside and we have the support of the regulators.