SFC to ban HNWs from using dark pools

Chris Hamblin

20 May 2015

The regulator's decision is part of the regulatory fallout from a consultative exercise. The idea, according to the SFC, is to "enhance and unify the regulatory regime" for alternative liquidity pools. Unlike 'lit' trading venues, so-called dark pools do not provide for pre-trade price and volume transparency.

The SFC says that it is also proposing to:

enhance the level of disclosure to users of ALPs;
ensure "user order priority" over the proprietary orders of ALP operators and their affiliates;
restrict the level of visibility of trading information that is available to the staff of ALP operators;
cease to restrict the hours of operation of ALPs;
allow ALPs to transact securities listed overseas as well as Hong-Kong-listed securities;
ensure the system adequacy of ALPs by addressing issues such as system controls, reliability, capacity, security and contingency measures; and
making risk management control, record-keeping and reporting requirements more onerous.

The public consultation ended on 25 April 2014. The SFC received a total of 59 written submissions. They were submitted by licensed corporations (including ALP operators), industry associations, a professional body, a statutory organization and individuals. Of the 59 respondents, two requested that their names and comments not be published and 36 requested that their submissions be published without disclosing their names.