New pools, but new rules

Author: | Published: 1 Dec 2009

Tom Young, Nicholas Pettifer and Elizabeth Fournier

Singapore launched Asia's first exchange-backed dark pool, the Chi-X/SGX joint venture, last month. But greater regulation of the trading pools looks inevitable, as the US proposes new rules and Europe's Cesr announces it will look into them. That's fine, as long as regulators understand the differences between different types of pools and the investors that use them.

Dark pools allow institutions to buy and sell large blocks of shares anonymously until trades are complete. But critics say the pools use prices displayed publicly without contributing any pricing information of their own. They also argue that the more successful dark pools are, the less chance there is of non-users finding buyers or sellers.

Others have criticised the effect pools have on retail investors that are not privy to the announcements. But Lu Su Ling, vice-president and head of strategy development at SGX, insisted...