Three of the largest dark pools told customers to trade elsewhere during at least part of yesterday’s session as concern about Ebola and global economic growth spurred the busiest day for U.S. stocks in three years.
Goldman Sachs Group Inc. (GS), Credit Suisse Group AG (CSGN) and UBS AG (UBSN) told some clients to temporarily stop sending orders as volume surged, according to five people with knowledge of the matter who spoke on condition of anonymity. The instructions came as the broader market processed11.9 billion shares, the most since Oct. 27, 2011, according to data compiled by Bloomberg.
Dark pools, private trading systems usually owned by banks, are just one component of the fragmented U.S. equity market, where buying and selling is spread across 11 exchanges and more than 40 alternative platforms. Older venues such as the New York Stock Exchange and Nasdaq Stock Market didn’t report any issues.
The dark pools’ requests didn’t prevent the U.S. equity markets from working normally for the vast majority of investors. Volume yesterday was several times greater than the busiest days during the 1990s technology bubble.
“Today shows that the market has the capacity to transact large volumes in a very volatile environment,” Remco Lenterman, managing director at Amsterdam-based market maker IMC, said yesterday. “Sure there are issues, but in the end of the day investors have the ability to transact very large transactions in a very deep and liquid market, no matter what critics will want you to believe.”