Lights out for Credit Suisse's 'Light Pool' stock trading venue

By John McCrank

NEW YORK (Reuters) - Credit Suisse is the latest bank to shutter one of its private U.S. stock trading venues, as increasing regulatory scrutiny makes it harder to justify the costs of running such trading systems.

Credit Suisse on Tuesday confirmed through a spokeswoman that it had shuttered its alternative trading system known as Light Pool on Nov. 18 after a strategic review of its algorithmic trading offerings.

Credit Suisse also runs Crossfinder, the No. 2 U.S. alternative trading system and has no plans to close it, the spokeswoman said. Crossfinder is a "dark pool," where trading information is not displayed, while Light Pool was an electronic communications network that displays its available orders to its clients.

The closing follows similar actions by Bloomberg LLC, Bank of America Corp (NYSE: BAC), Convergex Group LLC, Citigroup Inc (NYSE: C), and Wells Fargo (NYSE: WFC) within the past couple of years, records from the Financial Industry Regulatory Authority show. In October, Goldman Sachs Group Inc (NYSE: GS) hired exchange operator Nasdaq to host and run its dark pool. (http://reut.rs/2gxw1f5)

Regulatory oversight of alternative trading systems has intensified in recent years, leading to spate of enforcement actions and new rules.

Credit Suisse and Barclays PLC agreed in January to pay more than $150 million combined to the U.S. Securities and Exchange Commission and the New York Attorney General to settle allegations that they deceived investors in their dark pools and the Light Pool network.

Dark pools allow investors to trade anonymously and only make data available after a trade, reducing the chance that others in the market will catch wind of a buyer's or seller's intentions and move the price against them.

Critics say private trading venues add to the fragmentation of the market, increasing complexity and costs for participants.

In November 2015, the SEC proposed rules requiring alternative trading systems to disclose significantly more information to clients about how they operate.

(Editing by Steve Orlofsky)

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