Luminex Trading & Analytics LLC, the upstart private stock trading venue owned by nine large investment managers, said on Sunday it had signed up more than 70 institutional investors ahead of an expected trading launch in early November.
Luminex plans to only allow institutional investors, such as mutual fund companies, to trade on its platform, snubbing the broker dealers and proprietary high-frequency trading firms that own and generate much of the trading in other private trading venues.
Luminex's 73 subscribers, which are listed on the company's website, include Vanguard, TIAA-CREF Investment Management, AllianceBernstein, Eaton Vance, Goldman Sachs Asset Management, Greenlight Capital Inc, and J.P. Morgan Investment Management.
The consortium that owns Luminex and collectively manages 40 percent of U.S. fund assets said it started the trading platform with the aim of lowering transaction costs and eliminating the types of profit driven conflicts of interest that have been seen in some existing venues. Any profits made by Luminex will be invested back into the company to further reduce trading costs.
The owners are Fidelity Investments, which was the driving force behind the company, as well as BlackRock Inc, BNY Mellon, Capital Group, Invesco Ltd, JPMorgan Asset Management, MFS Investment Management, State Street Global Advisors and T. Rowe Price.
The trading platform is a so-called "dark pool," where pre-trade information is limited in an attempt to help investors trade large blocks of shares without the market knowing and moving the price against them.
Regulators have increased their scrutiny of the dark pools in recent years. There are more than 35 broker-run trading venues competing for much of the same business as more heavily regulated public stock exchanges.
U.S. Securities and Exchange Commission member Kara Stein said on Wednesday that the lack of information available on how different dark pools operate makes it difficult for investors to evaluate risks and make informed choices about different venues, which vary widely in pricing, order priority and customers.
Recent enforcement actions involving the trading platforms include a $20.3 million SEC settlement with brokerage firm Investment Technology Group on charges it ran a secret trading desk that profited off of confidential customer information within its dark pool.
Regulators also fined UBS Group AG $14.4 million in January for violations in its dark pool, and in June 2014, New York's attorney general brought a lawsuit against Barclays for alleged fraud within its dark pool.
