Stock exchange operator Nasdaq Inc. is launching new market surveillance capabilities for trading in dark pools, the company announced on Thursday.
The extension of its existing trade surveillance technology to dark pools, will help alternative trading systems (ATS) that operate dark pools, and traders that internalize order flow or trade in external dark venues, to monitor for potentially abusive behaviour, such as insider trading, front running, and other forms of market manipulation taking place in the dark, Nasdaq said in a statement.
It will also allow dark pool operators to prove that broker-dealer affiliates are not trading ahead of client orders, improving the integrity of the dark pool, Nasdaq added
“In order to ensure integrity and compliance, dark venue operators and participants internalizing or crossing order flow, or externally participating in dark venues, need to have processes and systems in place to monitor activity for manipulative trading,” said Michael O’Brien, head of product development, SMARTS Trade Surveillance, in a statement. “Not only does this support regulatory compliance needs, it is simply good business practice, particularly in a quickly evolving marketplace like dark pools.”