Dark pool trading refers to opaque trading platforms which are done internally. It’s also a mechanism where everyone can trade with no one seeing the size of the order until well after the transaction has taken place.
“It sounds sinister but it’s a very easy way for big institutions to move or to adjust their portfolios in a manner that does not spook the market,” Michael Hewson, senior market analyst at CMC told CNBC Africa.
“It allows one to wind up large positions across asset classes and different sectors,” added the market analyst.
According to media reports, Barclays is being accused of deceitfully misleading its clients about how LX, a dark pool, operated.
“The crux of this particular problem is that Barclays marketed this dark pool as totally opaque and free of all high frequency traders, apparently that was not the case, which is what US regulators are looking at currently,” noted Hewson.
On another development, [DATA SBK:Standard Bank Group], Africa’s largest bank, has also reported to have been involved in commodities fraud in China, likely to cost the bank a reported figure of 1.8 billion US dollars.
Hewson believes the likely penalty on the African bank is minimal compared to charges faced by international banks.
“The sounds like a very small amount of money when you consider the level of fines being levelled across the board in the US, UK and European banks with respect to malpractices around interest rates fixing,” noted Hewson.
Some of the leading global banks, Citigroup, Goldman Sachs and JP Morgan & Chase are reported to have recorded worrying double digit declines in trading revenues.
Citigroup’s decline has been attributed to the seven billion US dollars settlement and declining income in its main stocks.