An alternative trading system (“ATS”) that does not publish quotes to the marketplace gets the unfortunate moniker “dark pool”. That label leads some in the investing public to believe that nefarious activities are taking place, when in fact dark liquidity has existed in many forms since the beginning of trading on organized stock exchanges. Indeed, ATSs that do not publish quotes are only one form of “dark” trading that occurs today.
The Securities and Exchange Commission (SEC) is focused on equity market structure, among its many responsibilities. With various rule proposals,as well as a concept release seeking comments on a wide range of market structure topics, the SEC has sought and received input from many market participants from the smallest of retail investors to the largest pension plans and the tiniest of hedge funds to the grandest of money managers, as well as all manner of broker-dealers and other financial intermediaries. The SEC is now synthesizing these comments and considering what new regulation, if any, is appropriate. Continue reading ‘Dark Pools: A Misunderstood Label’ »