Citi Shutters Lavaflow – 5th Largest ‘Dark Pool’ In America

When the 5th largest dark pool trading venue (by volume) in America is shuttered, as Citi notes because its "capital, resources and efforts would be better redeployed elsewhere," you know there is a problem in US stock trading volumes and liquidity. Everyday we get 'glimpses' of this collapse – most recently yesterday's AAPL flash-crash – as human traders (who provide the 'fish' for the machines) disappear and HFT liquidity-providers pull liquidity in a flash. Crucially, as we hinted previously, we wonder if the large firms are exiting the dark pool business before some engineered market collapse is pinned on these opaque 'markets' who have come under increased regulatory scrutiny.

The demise of LavaFlow…

 

We recently noted that Citi's Lavaflow platform had been overtaken by the anti-HFT group IEX…

 

And after facing fines earlier in the year…

A private trading venue owned by Citigroup will pay a $5 million penalty to settle charges that it failed to protect customers' data, marking the latest case in a crackdown by U.S. regulators over alleged market rule violations.

 

The Securities and Exchange Commission said the unit, LavaFlow Inc., is settling the civil case without admitting or denying the charges.

 

The SEC said LavaFlow failed to put adequate safeguards and procedures in place to protect its subscribers' confidential trading information from March 2008 through March 2011.

 

 

The SEC's prior three cases against ATS venues were targeting a type of platform known as a "dark pool," which lets investors trade anonymously and does not publicly display quotes.

 

LavaFlow is distinct in that it is not a dark pool. Rather, it operates as an "electronic communications network," or ECN, a trading venue that displays some information about pending orders in the system.

Reuters reports, Citi is pulling the plug…

Citigroup Inc said on Tuesday it is shutting down its alternative stock trading venue LavaFlow at a time when regulatory scrutiny around broker-run trading platforms has increased, forcing banks to rethink their costs.

 

"Following a recent review of the LavaFlow ECN, we have decided that our capital, resources and efforts would be better redeployed to other areas within Citi’s Equities Division," Citi said in a statement.

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via Zero Hedge http://ift.tt/1vd0eQa Tyler Durden

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