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October 21 SEC Open Meeting on "Dark Pools"

According to an October 14 announcement, the SEC will hold an open meeting on October 21 to consider proposals to regulate "dark pools" of liquidity.  The SEC's Sunshine Act filing states that the subject matter of the Open Meeting will be:

The Commission will consider recommendations to propose amendments to the regulatory requirements that apply to non-public trading interest, including so-called "dark pools" of liquidity. The recommended proposals are to:

(1) amend the definition of "bid" or "offer " in Regulation NMS under the Securities Exchange Act of 1934 (Exchange Act) to address actionable indications of interest;

(2) amend the display obligations of alternative trading systems in Regulation ATS under the Exchange Act; and

(3) amend the joint-industry plans for disseminating consolidated trade data.

"Dark pools" are automated trading systems that do not display quotes in the public stream intended to help market participants preserve anonymity and engage in transactions without moving the market.  In a recent speech before the IOSCO Technical Committee Conference in Basel Switzerland, Chairman Mary L. Schapiro highlighted the Commission's interest in "dark pools."

[S]ome so-called dark pools in the U.S. are not really dark for all market participants. Rather, they transmit electronic messages to selected market participants that convey valuable information about their available liquidity.

The widespread use of these messages, often referred to as “indications of interest,” could create the potential for significant private markets to develop that exclude public investors. Such a two-tiered market would be inconsistent with the fundamental principles of fairness and efficiency that guide U.S. market structure policy.

We have recently begun an in-depth review of multiple market structure issues given the rapid advancements in technology. In addition to our recent actions with regard to flash orders and our current focus on dark pools, we will also examine high frequency trading, direct market access and co-location.

The October 21 open meeting is scheduled to begin at at 10:00AM in the Auditorium (Room L-002) at the agency's headquarters located at 100 F Street NE in Washington, DC.  The meeting is open to the public on a first come first served basis, and the proceedings will be webcast via a link on the SEC's website, www.sec.gov.

The full text of the Sunshine Act notice is available at:  http://sec.gov/news/openmeetings/2009/ssamtg102109.htm

The full text of Chairman Schapiro's October 8, 2009 remarks about dark pools is available at:  http://sec.gov/news/speech/2009/spch100809mls.htm#darkpools