Operators of the world's 50 largest stock exchanges are working together to call for regulatory change to combat off-market trades in large blocks of shares held in so-called dark pools because they are concealed from public scrutiny.
Outgoing Hong Kong Exchanges and Clearing chairman Ronald Arculli said the World Federation of Exchanges members would fight for international regulatory reform to safeguard the interests of traditional exchanges and investors.
Arculli steps down from his position with the HKEx today, but will remain chairman of the federation until October. The federation was now a loose alliance of the world's biggest traditional stock markets with a combined market capitalisation of US$55 trillion, but this was due to change, Arculli said.
'The federation will be restructured to become a closer alliance of traditional exchanges worldwide. It will hire a full-time chief executive over the following months who will handle the lobby work for global stock exchanges to regulators worldwide,'' Arculli said.
Reform aimed at ensuring that all trading in shares was regulated and transparent - including trades in dark pools - will be a priority for the more tightly-knit federation.
'We will call on securities regulators worldwide to review current regulations,' Arculli said. 'We want them to make sure that dark pools and other electronic trading systems are subject to the same level of regulation as traditional stock exchanges. This would ensure fair competition,'' he said.
Traditional exchanges are subject to more regulations than private electronic trading systems. In Hong Kong, the HKEx, which is the operator of the local stock market, must get the approval of the Securities and Futures Commission for new product launches, or to make changes to trading rules and fees. But operators of dark pools can set their own rules.