On November 18, 2015, the U.S. Securities and Exchange Commission (the “SEC”) announced that it had “voted to propose rules to enhance operational transparency and regulatory oversight of alternative trading systems (“ATSs”) that trade stocks listed on a national securities exchange . . . , including ‘dark pools’.” Dark pools are ATSs which allow off-exchange trading of securities for institutional investors.  While any trades can be executed on a dark pool, they are typically used for block trades and are not accessible to the general public; trades on dark pools are executed anonymously and they do not display price quotes to the public.  There are several practical advantages for dark pool participants executing large block trades on dark pools, rather than exchanges.  First, the trades can be executed without the same market impact as if done on an exchange.  Additionally, for all trades, there are lower transaction costs for dark pools. The drawbacks of dark pools include the potential that, due to the lack of transparency, a buyer may not achieve the best possible price. Dark pools are generally owned by either large broker-dealers, exchanges or electronic market makers. Dark pools carry regulatory concerns as their lack of transparency could make market manipulation easier.

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