SEC’s Brigagliano Concerned About Dark Pools
In a recent speech, James Brigagliano, the recently appointed Co-Acting Director of the SEC’s Division of Trading and Markets, proposed broader regulatory investigation of trading through dark pools (aka private electronic trading systems that do not display public quotes.) Mr. Brigagliano expressed concerns about lack of price transparency. He suggested that dark pools should provide post-trade information at least in summary form. He also raised the issue whether order messages or indications of interest (IOIs) should be regulated as “quotes.” Mr. Brigagliano is concerned about the development of “significant private markets…that exclude public investors.”
OUR TAKE: If the SEC treats dark pools as exchanges and requires post-trade data, we believe the unintended consequence would be to drive smaller entrepreneurial players out of business, thereby reducing price competition. Increasing regulation may not be best answer for investors.