“Terrence Duffy, who as executive chairman of CME Group Inc. oversees the world’s largest futures exchange, has a solution for those seeking to fix the U.S. stock market: kill dark pools.
While all futures trades happen on exchanges such CME Group’s, only about 60 percent of American equity volume does. The rest takes place on venues including dark pools, where orders are hidden until transactions are completed. That hurts investors because it obscures the true price of stocks, Duffy said yesterday during an interview at Bloomberg News headquarters in New York.
“Fix the fragmentation issue, and you’ll fix the problem,” Duffy said. “We need to have 100 percent of that liquidity on exchanges.”
Duffy’s position aligns him with his biggest rival: Jeffrey Sprecher, the chief executive officer of IntercontinentalExchange Group Inc. Sprecher’s company, which like Chicago-based CME Group has its roots in futures, recently bought the New York Stock Exchange, giving it about 20 percent of the nation’s equities volume. NYSE and its rivals have lobbied the U.S. Securities and Exchange Commission to enact rules limiting the amount of trading on dark pools.
In Duffy’s idealized stock market, even though trades could still be distributed across multiple exchanges, dark pools and other off-exchange platforms would be eliminated. There are currently 13 stock exchanges, with ICE, Nasdaq OMX Group Inc. and Bats Global Markets Inc. the biggest operators. Beyond that, there are about 45 alternative trading systems, including dark pools.
In CME Group Inc. Chairman Terrence Duffy’s idealized stock market, even though trades…Read More
