The launch of Luminex, a U.S. equity dark pool run by nine large money managers, might have made only a ripple in trading volume, but observers said it will set off big waves in institutional trading.
Luminex Trading & Analytics LLC CEO Jonathan A. Clark said the Boston-based trading venue, which started operations Nov. 3 with about 60 participants, now has nearly 100 clients with more being sought.
Other sources said the block-trading market targeted by Luminex always will remain small compared with overall U.S. trading volume, but the impact on institutional trading in how large blocks are moved will be big — and other dark pools will take notice.
In its first four days of operation, Luminex executed 299 trades in a total of 11.45 million shares, according to data from the Financial Industry Regulatory Authority Inc., Washington. That pales in comparison to the top-executing venue for the week of Nov. 2 based on total share and trade volumes — UBS AG's ATS, with 3.66 million trades involving 570.13 million shares. (FINRA alternative trading system data lags two weeks; for the week of Nov. 16, Luminex executed 128 trades involving 3.03 million shares.) Despite the relatively low numbers, Luminex's volume was impressive, said Jamie Selway, managing director and head of electronic brokerage at Investment Technology Group Inc., a New York-based dark pool and financial markets technology provider.
“It's definitely early days,” Mr. Selway said. “But I think the launch went better than even they might have expected. I don't want to speak for Luminex, but as an outsider, the launch exceeded expectations, particularly in the first week.”
Mr. Selway said that while rival equity dark pools haven't so far announced any changes in reaction to Luminex's entry, ITG and other dark pools are looking at making some enhancements to encourage block trading on their venues.
“I know for us there's been a lot of investment to improve liquidity, and probably others in the industry are doing the same.” Mr. Selway said. “For us, our response has been to expand globally, like to India, Thailand, Brazil. But I think you'll see enhancements by us and by other dark pools in the first quarter to address block-trading concerns.” He wouldn't elaborate on what those enhancements might be.