Dark Pool Stock Trading Picks Up As Europe Debates New Curbs

Europe stocks close higher on hopes of US deal

The rally is based on expensive price cutting and manipulated sales data, which will only further undermine the precarious state of most of Europes non-German manufacturers. Car sales may have stopped falling at close to 20 year lows, and forecasts for next year are positive. But much of this improvement has been down to huge spending by the manufacturers on discounts and price cuts, while dealers are being persuaded to buy the excess cars on their lots which count as new car sales. These will eventually be sold on to the public at well below sticker price. The Brussels-based European Car Manufacturers Association, known by its acronym in French, ACEA, ( www.acea.be ) announced today that Western European car sales were up 5.4 per cent in September compared with the same month last year at just over 1.1 million, bringing the total for the year so far to 8.8 million. Thats a fall of 4.0 per cent on the first nine months of last year. Peter Fuss, partner at consultants Ernst & Young Ernst & Young s Global Automotive Center in Frankfurt, Germany, said the recovery in car sales was down to the improvement in Europes economic outlook, with the Euro currency zone pulling out of recession during the second half of 2013. But with factory use down to less than 65 per cent by manufacturers, according to Fuss, this underlines the chronic overcapacity in Europe, which remains unresolved because of pressure from unions and governments to resist rationalisation. The European industry is looking for a bailout along the lines of the U.S. intervention on behalf of bankrupt GM and Chrysler, to allow it to finally shut-down uneconomic factories. But given the financial crisis in the euro zone, this is simply unaffordable. Ernst & Young expects an overall decline of three per cent in Western Europe for the whole year, and only modest growth next year. This growth will continue to be artificial one that is driven by discounts and self-registrations. We estimate it will take at least two years for the market to witness the real sales recovery, driven by replacement demand. As a result, profits for automakers are likely to remain challenged at least until 2014 is out, Fuss said.

The end investors,” Vincent Dessard, regulatory policy advisor at the European Fund and Asset Management Association trade body, said. Thomson Reuters and Markit data suggests the volume of dark trading rose for the fifth consecutive month in September, accounting for 5.84 percent of all European share trade, more than double the 2.8 percent volume recorded in September 2011. The rising popularity of off-exchange activity has sparked fresh debate over proposed caps on dark pool trading in the next revision of the European Union’s Markets in Financial Instruments Directive (MiFID), under discussion in Brussels. Policymakers want to cap daily dark trading at 4 percent of total trading in each stock in the EU, and total aggregated dark pool transactions at 8 percent of all European trade. They worry that transactions capable of destabilising markets could go undetected unless limits are introduced. They also fear users are draining liquidity from public exchanges, making it harder for other investors to value stocks accurately. Anyone can use these pools if they have membership and fees are typically lower than trading stocks using traditional stockbrokers. The biggest users of these networks are large fund managers and banks who regularly trade large volumes of stocks. Supporters of off-exchange trading say removing the option of buying and selling shares privately will make large portfolios more costly to manage and potentially hurt performance of investment funds and pensions. “This will hurt liquidity but more specifically, it will hurt European citizens. When the price for one security is set, you are removing the capacity for an asset manager to negotiate something lower,” Dessard added. Thomson Reuters aggregates all trade data on ‘dark’ Multilateral Trading Facilities (MTFs) and platforms provided by BATS-Chi X, London Stock Exchange-operated Turquoise (LSE.L) and Liquidnet.

European equities closed higher on Wednesday, paring earlier losses, as investors bet on an imminent deal in Washington to avert a U.S. debt default and bring an end to the government shutdown. IBEX 35 — The pan-European FTSEurofirst 300 Index provisionally closed up 0.1 percent, taking its lead from U.S. averages, which moved higher after Reuters reported that Senate negotiators were “very close” to announcing a deal . The Senate is likely to move “quickly” to pass the fiscal debt deal currently being negotiated, according to a Senate aide. Senate leaders are in talks with House leaders to find a way to win fast passage of the deal in both chambers. The New York Times reported that the deal is likely to be announced by midday, citing Senate aides. After the closing bell on Tuesday, Fitch credit rating agency placed the United States’ triple-A rating on “rating watch negative”, citing the debt ceiling gridlock. Italy announces budget In European news, the U.K’s jobless rate a key factor influencing the Bank of England’s interest rate policy held steady in the three months to August, but the number of people claiming unemployment benefits fell much more than expected. (Read More: UK unemployment steady but claimant count plummets ) Inflationary pressures in the euro zone continued to ease, data showed on Wednesday. Consumer price inflation for the 17 countries that use the single currency fell to 1.1 percent (year-on-year) in September, its lowest since February 2010, according to Eurostat. Car registrations in Europe posted a 5.4 percent (year-on-year) rise in September, highlighting a recovery in the continent, with impressive demand growth from southern European nations like Greece and Spain. (Read More: Southern Europe helps car registrations post recovery ) Italy’s government unveiled its 2014 budget law on Tuesday , in which it lowered the tax rate on labor. After withdrawing planned cuts to the health care budget, Prime Minister Enrico Letta hailed it the country’s “first budget without tax hikes or social cuts in year”. LVMH falls In stocks news, shares of France-based food producer Danone closed down 2.28 percent after announcing that an Asian recall of baby formula had made a worse-than-expected dent in revenues in its third quarter.