As Regulators Eye Dark Pools, Canada is in the Spotlight
In reviewing the current regulatory framework in the U.S. and Canada, we can conclude that some of the concerns raised by IOSCO are already addressed. Furthermore, Canada has taken a step closer to IOSCO's principles than the U.S. These principles encourage:
- Full market transparency and integrity - Clear priority of transparent orders - Fair access to market and information - Stringent regulatory reporting
In October 2012, Canadian regulators implemented new rules on dark pools, including visible orders that will have priority over dark orders in the same marketplace at the same price. The new rules have drawn attention from regulators worldwide, as they carefully observe the impact of the new rules on the dynamic between market protection and growth.
[How Dark Are The Pools?]
We expect that dark pools, as a key component of the broader market structural change, will be kept in the spotlight of regulators' ongoing review of the overall market structure. In addition, high frequency trading has been on regulators' radar for a while. With recent market developments, more discussion is expected to revolve around the interaction of these two market phenomena.
In the meantime, regulators on the other side of the Atlantic are reviewing and proposing reforms on dark pools in Europe. In the third blog of this three-part series, we will provide an update on the regulatory environment of dark pools in Europe.
What role do you think regulation will play in dark pools in the U.S. and Canada? Join the discussion.
Capco's David Gest and Thomas Riesack contributed to this piece.
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