Dark Markets May Be More Harmful Than High-Frequency Trading

Mon, Apr 7 2014

(This story has been corrected to fix spelling of name to Preece from Pierce inparagraphs 18, 27, and 30.)

By John McCrank

NEW YORK (Reuters) - Fears that high-speed traders have been rigging the U.S. stock market went mainstream last week thanks to allegations in a book by financial author Michael Lewis, but there may be a more serious threat to investors: the increasing amount of trading that happens outside of exchanges.

Some former regulators and academics say so much trading is now happening away from exchanges that publicly quoted prices for stocks on exchanges may no longer properly reflect where the market is. And this problem could cost investors far more money than any shenanigans related to high frequency trading.