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SEC Proposes "Dark Pool" Regulations

At an open meeting yesterday, the SEC proposed new regulations designed to "enhance transparency and promote fairer, more efficient markets for US-listed stocks."  In short the proposed regulations would for the first time:

  • Require generally that information about an investor’s interest in buying or selling a stock be made publicly available, instead of just to a select group operating with a dark pool.


  • Require that dark pools publicly identify that it was their pool that executed the trade.

Specifically, the SEC's proposals deal with the sharing of information about dark pool trades, both pre-trade and post trade.  In the pre-trade period, in many instances, investors are able to signal to certain dark pools and other alternative trading systems that they have an interest in either buying or selling a security; however these indications of interest (IOIs) are transmitted only to a small set of market participants, the dark pools, rather than the market a large. The rules proposed yesterday are intended to address these pre-trade disparities in information sharing about IOIs, particularly by dark pools and other trading venues, including OTC market makers.  According to the Commission:

The first proposal would ensure that actionable IOIs are treated like quotations and are subjected to the same disclosure rules as those that apply to quotations.

The second proposal would lower the ATS trading volume threshold for displaying best-priced orders. Currently, an ATS, if it displays orders to more than one person, must display its best-priced orders to the public when its trading volume for a stock is 5% or more. This proposal would lower that percentage to 0.25%, including for dark pools that use actionable indications of interest (IOIs).

The Commission's rule proposals would address post-trade transparency by creating "a similar level of post-trade transparency for [dark pools and other alternative trading systems] as for registered exchanges.  Specifically, the proposal would amend existing rules to require real-time disclosure of the identity of dark pools and other ATSs on the public reports of their executed trades."

The full text of the Commission's proposals for regulating dark pools will be available in upcoming weeks.  The full text of the Commission's fact sheet about yesterday's proposals is available at:

An archive of the webcast of yesterday's open meeting is available at: