Dark pools illuminated?

The Technical Committee of the International Organization of Securities Commissions has published its "Principles on Dark Liquidity", outlining ways to assist securities markets authorities in dealing with issues concerning dark liquidity, the growing phenomenon when trading occurs outside the view of other market participants. The principles are designed to:

• Minimise risk: minimise the adverse impact of the increased use of dark pools and dark orders in transparent markets on the price discovery process by generally promoting pre-trade and post-trade transparency and encouraging the priority of transparent orders;
  
• Offset fragmentation: mitigate the effect of any potential fragmentation of information and liquidity by generally promoting pre-trade and post-trade transparency and consolidation of such information;
  
• Provide information: help to ensure that regulators have access to adequate information to monitor the use of dark pools and dark orders for market monitoring/surveillance purposes and to enable an appropriate regulatory response to market developments; and
  
• Provide more information: help to ensure that market participants have sufficient information so that they are able to understand the manner in which orders will be handled and executed.

The IOSCO technical committee has handed the report over to the member regulators for consideration and implementation. ISOCO wants market liquidity and efficiency, but also integrity for markets.

Source document: The IOSCO report is a 32-page pdf file with attachments.