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SEC Proposing Release on Dark Pool Regulation

The SEC has issued the full text of its rule proposals dealing with with the sharing of information about dark pool trades, "Regulation of Non-Public Trading Interest."   As we stated in our October 22, 2009 post, SEC Proposes "Dark Pool" Regulations, 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 rule proposals 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.  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.

Comments on this proposing release are due 90 days after it is published in the Federal Register.  The full text of the Commission's rule proposal, "Regulation of Non-Public Trading Interest," is available at:  http://www.sec.gov/rules/proposed/2009/34-60997.pdf