Nasdaq is in negotiations with several brokers to host and run their private stock trading venues, or dark pools, within its data center, two of the exchange operator's executives said on Thursday.
There are nearly 40 of the broker-run alternative trading systems (ATS) in the United States that compete with 12 public exchanges, including Nasdaq and Intercontinental Exchange Inc's New York Stock Exchange.
Dark pools have had less of a regulatory burden than public exchanges, but in recent years they have come under increasing regulatory pressure, driving up legal, compliance, and technology costs for the firms that run them.
Nasdaq has created a hosted dark pool, referred to inside the company as "Ocean," that uses Nasdaq's technology, operations, and compliance monitoring, Tom Wittman, Nasdaq's global head of equities, said at the company's investor day presentation.
Ocean will be a part of Nasdaq's market technology business, which provides technology to other exchanges and brokers, and will not need regulatory approval to get up and running, Adena Friedman, Nasdaq's president and chief operating officer, said in an interview on the sidelines of the presentation.
"We have been in negotiations and discussions with several clients and it's just a matter of time before that will happen," she said of the new offering.
Dark pools do not have to provide trading information, such as trade sizes and prices, to the public prior to trades taking place, with the aim of getting large orders done with minimal price movement. Nearly every major bank has a dark pool.
But a spate of recent enforcement actions has led to new rule proposals to increase transparency in the trading venues.
In late January, Barclays and Credit Suisse agreed to pay more than $150 million combined to the U.S. Securities and Exchange Commission and the New York Attorney General to settle allegations that they deceived investors in their dark pools.
The SEC also reached a $20.3 million settlement last August with Investment Technology Group on charges the brokerage ran a secret trading desk that profited from confidential customer information within its dark pool. That followed a $14.4 million fine for UBS in January 2015 for allegedly favoring some customers over others in its ATS.