Finance: Off-exchange Trading Venues

Lord Davies of Oldham Excerpts

Monday 18th July 2011 Lords Chamber

[Lord Sassoon]

My Lords, I certainly do not think we should relax on the issue of high frequency trading. We only have to think back to the events of 6 May 2010. I do not need to remind your Lordships that there were two crashes on that day: one was the crash of the outgoing Government; the other was the so-called flash crash in which the Dow Jones index plummeted in a number of minutes by 9 per cent but fortunately, unlike the Labour Government, recovered by 9 per cent a few minutes later. We certainly take this issue very seriously but we need to continue to do the work and see where this leads us.

[Lord Davies of Oldham]

My Lords, I think the country should be on its guard when euphemisms such as “black pools” are used. I agree with the noble Lord that they are an aid to liquidity but he will know—and I am grateful to him for identifying that the Government are expressing some anxiety in this respect—that they restrict transparency in the marketplace. We all know the price that we have paid for a lack of understanding of what has gone on in the world of finance and the importance, therefore, of the Government being concerned to get as much openness and transparency as they can.

[Lord Sassoon]

My Lords, if they were black holes as the noble Lord suggests, we would be worried, but for dark pools, IOSCO, the international regulatory organisation, has recently laid down six principles to guide the operation of the regulatory framework of dark pools, and the FSA’s assessment is that the UK and the EU are fully compliant.