A group of nine fund managers has teamed up to start a dark pool dedicated to large stock trades that will open later this year.
The new market — named Luminex — will admit money managers who are looking to trade a large quantity of shares at once, according to a statement.
The members of the group are Fidelity Investments, Bank of New York Mellon, BlackRock, Capital Group, Invesco, J.P. Morgan Asset Management, MFS Investment Management, State Street Global Advisors and T. Rowe Price Group, according to Tuesday's statement.
“Our goal is to build trust among users through transparent trading rules and protocols and efficient execution,” Michael Cashel, interim CEO of Luminex, said in the statement.
Dark pools are private trading venues where investors can buy and sell shares without making their orders visible to the rest of the market. Dark venues were originally set up to handle large block trades, but the size of the orders they process has fallen in recent years.
Dark pools have come under increasing scrutiny in the past year. The Securities and Exchange Commission and New York attorney general are both investigating the platforms. Last week, the SEC hit UBS Group with a record fine on a dark pool for failing to follow rules designed to ensure stock trades are executed fairly.
The new venue will require traders to commit to a minimum block size when entering orders to buy or sell stocks. Before a transaction, the customer will be able to increase the size of the order.
Fidelity said in April that it had explored setting up its own dark pool. Vincent G. Loporchio, a senior vice president at Fidelity, said the venue would improve transparency and liquidity. The firm's trading division already runs a dark pool called CrossStream.
Luminex Trading & Analytics will operate as an independent business, though it will be governed by a board that has one representative from each of the money managers. It will seek to be “self-sustaining,” according to the statement.
