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By Huw Jones
LONDON, Sept 6 (Reuters) - A group of asset managers andbanks are trying to cut the cost of trading big blocks of sharesvia so-called dark pools by teaming up with the London StockExchange Group's Turquoise subsidiary.
The new venture brings together for the first time the"buy-side", or funds who invest in shares, the "sell-side" bankswho channel share orders, and a trading platform which executesthose orders.
It also shows the pressure on both sides to cut costs in abusiness where margins are already thin and regulatory costs areincreasing.
Michael Bellaro, global head of equities at Deutsche AssetManagement, said finding enough liquidity to bring back blocktrading was "mission critical" for asset managers to cut costs.
Turquoise CEO Robert Barnes said with real market returnsnear zero and interest rates in negative territory, investorslook to block trading to help them outperform benchmarks.
Plato Partnership, which includes Citigroup, GoldmanSachs, AXA Investment Managers and FranklinTempleton, said it had signed the co-operation agreement with Turquoise.
Turquoise is 51 percent owned by the London exchange andtrades shares across 19 European countries. The rest ofTurquoise is held by 12 investment banks, some of whom also backPlato. No equity stakes are involved in the Plato-Turquoisedeal.
The cooperation agreement coincides with a planned merger ofthe London exchange and Deutsche Boerse.
The tie-up's main focus is on Turquoise's "midpoint darkorder book" which handles trades worth over 250,000 euros ($279,000). It will be renamed Turquoise Plato, but remains opento any user.
Plato members will not have any financial privileges such ascheaper fees when using Plato Turquoise, Nej D'jelal, managingdirector of equities at Barclays, said.
Dark pools keep share transactions under wraps until theyare completed to avoid big price moves, but have come underscrutiny by regulators who want more transparency in trading.
The European Union will implement new curbs on dark pooltrading from January 2018 but the large trades Plato Turquoiseis aiming for will benefit from exemptions.
Turquoise's non-dark or "lit trading" service is not part ofthe deal.
Dark pools have been accused of favouring some investorslike high-speed traders, over other customers.
A venture backed by the top asset managers and banks inEurope could suck liquidity from other dark pools unable toattract similarly sized trades, making it harder for users likehigh-frequency traders to deal in the dark, industry officialssay.
But Plato said the new platform would seek to ensure "theprotection of orders with the goal of ensuring fairness for allparticipants".
Plato, a not-for-profit industry consortium, will invest itsshare of revenues into research into increasing marketefficiency, with improvements in trading less liquid shares insmall companies next on the agenda.
Britain is due to leave the European Union and Turquoisecurrently uses a "passport" under the bloc's rules to offercross-border share trading. Turquoise and Plato officials didnot elaborate on what would happen if Britain lost thosepassporting rights. ($1 = 0.8974 euros) (Reporting by Huw Jones. Editing by Jane Merriman)
