of course they are not new, but they are growing in size and scope.
Last week, NYSE Euronext urged the SEC to examine the impact of the early looks at some U.S. venues [TRANSLATION: NYSE Euronext to SEC, "do your job"]. But without new regulation, bank-sponsored dark pools will continue to swell [TRANSLATION: As long as there is no penalty or risk for insider trading, more and more firms will engage in it], said Rosenblatt's Schack.
"Most brokers want to execute trades as quickly and cheaply as possible," he said. "I don't know that we've reached the limit because there are some firms with big equity businesses out there that still haven't maximized the potential to internalize orders in their dark pools." [I am really, DEEPLY disturbed every time I read such comments in the mainstream media. Here is an example to explain how bothered I am: Imagine if a company starts offering a riskless and anonymous way to kill other people, a means to murder with zero risk of getting caught. Now imagine someone else raving how wonderful this is and hoping that more firms start offering this option. What exactly am I supposed to make of that person? Does he lack any concept of ethics? Or is he a complete idiot?]
there was an interesting warning about dark pools in 2008:
http://www.moneymorning.com/2008/07/10/dark-pools/there are a few "realities" we can count upon.
As you might expect, not all of them are good.
Let’s look at the top three:
First, as more volume moves to the so-called Dark Pools, the very notion of what constitutes "public pricing" becomes suspect. Practically speaking, if we’re seeing only 50% of the trading volume in a given stock, who’s to say that the pricing we’re seeing is accurate if the other half remains a mystery.
Second, the small- and mid-cap stocks that for so long have been the domain of smaller investors will likely become harder to trade. The reason: Dark Pools will absorb the liquidity that’s presently out in the open, just as a "black hole" in outer space sucks in all the matter that’s nearby. The net effect could be that smaller transactions become more inefficient, or that public pricing actually disconnects from private pricing. Either way, individual investors may not get the best possible prices.
Third, you can bet regulators will get interested if there is even a whiff of impropriety at the expense of smaller investors who perceive (and rightly so) that they are being "locked out" of the markets by the big boys yet again. On the other hand, maybe those regulators don’t care at all.
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