Brokers Continue Building of Bilateral Links Between Dark Pools

Originally appeared in MiFID Monitor

Dark pool operators have been actively discussing creating bilateral trading links between their dark pools over the last few months in order to pool their liquidity and better meet the requirements for best execution under MiFID.

Last month, it was reported that Credit Suisse and Instinet had become the first institutions to execute trades on each other’s dark pools via their smart order routers (SOR) and algorithmic trading platforms (MiFID Monitor, 29 Jul 2008).

But they are not alone; Goldman Sachs, Morgan Stanley, Lehman Brothers, Fidelity Capital Markets, Nyfix Euro-Millennium and UBS have also announced plans for bilateral links over the last few months.

The idea behind these links is to aggregate liquidity so that these firms are able to provide a sufficient depth of liquidity to meet the requirements for best execution under MiFID in a fragmented market.