Many predicted it, some applaud it, others loathe the decision, but let's face it the battle lines are being drawn between dark books and buy side algos. The latest to throw down the gauntlet is Pipeline Trading Systems. Prior to that ITG-POSIT put the kibosh on algos (later they reconsidered).
Who will win this battle has yet to be determined.
What are the driving forces?
"It's the bandwidth, Stupid!", to paraphrase from a past election.
It takes a significant amount of work to implement, deploy and maintain a dark book (or an open book for that matter). True, it takes a significant amount of work to implement an algorithmic trading platform. However, algos don't face the same rules and regulations (e.g. RegNMS) as do their sell side brethren.
Let's frame this in an old world example...
Imagine a few thousand customers streaming into and out of a 'brick and mortar' store all just 'looking' but not buying. It costs the store owner money to maintain the large sales staff and floor space to handle the customer flow on the hope that someone will actually purchase some goods. If the overwhelming percent of people in the store are just looking, it's a time and money drain driving up costs and driving down revenue.
It's the same with dark books. All those algos add overhead w/o generating revenue (trades).
It takes a serious investment in hardware (servers, routers, databases), and software to support all the buy side algos that are just looking.
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