The NYSE says uneven regulation is sending more and more trades into Wall Street’s so-called dark pool and hurting investors.
FORTUNE — The owner of the New York Stock Exchange says it’s being picked on. And that could be hurting investors as well.
A top official at the NYSE Euronext, which owns the U.S.’s largest stock exchange, says regulators are singling out the NYSE and other listed markets in enforcing stock trading rules. He says regulators have allowed market makers and other operators of non-public trading networks to skirt stock rules, which is hurting the NYSE’s ability to compete.
In January, over a third of all U.S. stock trades were completed on private exchanges, according to Rosenblatt Securities. That was a record, and nearly double the volume of such trades just four years ago. “We spend a fair amount of money regulating our markets, and ensuring things are fair,” says Michael Geltzeiler, the CFO of NYSE Euronext. “We are happy to compete but we want to compete on the same ground.” Geltzeiler made the comments at an investor conference on Thursday morning.
Worse, Geltzeiler says unequal regulation is driving an increasing number of trades into so-called dark pools, which are alternative exchanges that allow traders to hide information. What’s more, the off-exchange markets are typically less liquid and therefore can be less reliable in times of market turmoil. Geltzeiler says so far European regulators have been more aggressive in addressing the problem than the SEC or other U.S. regulators. “We don’t see why we are picked on rather than people encouraging the business to gravitate to markets that are transparent and work in difficult times.”
Earlier this year, European regulators forced the New York Stock Exchange to call off its merger with German exchange Deutsche Boerse. The New York Stock Exchange recently proposed a plan that would lower the fees it charges on trades completed on behalf of individual investors. Electronic brokerage firms, such as E-Trade and others, are increasingly sending those trades to alternative trading networks. The NYSE hopes it’s proposal would return those trades to the exchange. The SEC has yet to rule whether the NYSE will be able to go ahead with its plan.
