Goldman Sachs has launched a new private stock trading dark pool venue’ to replace it current dark pool venue.
The new venue, Sigma X Squared, or Sigma X2 is to be operated by NASDAQ and will replace its current dark pool venue Sigma X. The new venue is being phased in gradually and the move follows fines paid by the bank last year regarding record keeping with Sigma X. Goldman Sachs provides the 11th biggest dark pool in the US.
The deal is subject to regulatory approval. It is an important deal for NASDAQ, which has seen revenues from equity trading shrink, and has invested heavily in developing Ocean, its dark pool hosting service.
Earlier this year Adena Friedman, who is president and chief operating officer of Nasdaq said: "We have been in negotiations and discussions with several clients and it's just a matter of time before that will happen." Dark pools have not been subject to the full glare of regulatory requirements in the way that other trading platforms are, but are now subject to Regulation Systems Compliance and Integrity, or Reg SCI, once they get to a certain size, and although Sigma X was not at that size, the NASDAQ deal should ensure compliance should it grow. However, in addition to Goldman Sachs, Credit Suisse Group, Barclays and UBS Group have all been fined regarding dark pool related violations.
It seems that customers expect the larger banks to offer dark pool venues, but for the banks themselves, it’s a tricky area, which in turn represents an opportunity for NASDAQ. Tom Wittman, Nasdaq’s global head of equities recently said: "It’s a big opportunity I think for us to provide technology.” According to Rosenblatt, Goldman Sach’s share of the dark pool market rose to 1.8 per cent in 2010, but has since fallen to just 0.5 per cent, as of last September.