Article Summary

Dark pool systems facilitate large trades off the main exchanges, like the NYSE. Because the trades are secret, dark pools allow institutional investors to make big trades without revealing their intentions. Recent SEC settlements indicate the agency is going to pay more attention to these kinds of systems.

This article by TELG managing principal R. Scott Oswald was published by Oregon Legal Journal on December 20, 2012. The full article is available as a PDF on our site and .

Excerpted from:

Oregon Legal Journal

Whistleblower Attorneys: Recent SEC Settlement with Pipeline Inc. May Encourage Dark Pool Trading Suits

The SEC has accepted the increasingly important role that alternative trading systems play in securities transactions, and it has adopted an aggressive enforcement posture to ensure those systems’ integrity.

Dark pools have captured a significant percentage of equity volume since 2007. In Oct. 2011, four years later, the SEC brought its first enforcement action against a dark pool.

The SEC’s $1 million settlement with Pipeline Trading, LLC, raised questions about the SEC’s interest in alternative trading systems. A year later there is little doubt that the case marked a shift in the Commission’s enforcement focus.

Just one year after Pipeline, the SEC has settled its second action against a dark pool, eBX, LLC. Also, the SEC approved an alternative trading system aimed at retail investors this past summer.

With Commissioner Elisse Walter succeeding Chairwoman Mary Schapiro, nothing suggests that this vigilant stance toward alternative trading systems will change any time soon. As such, we can expect more enforcement actions with characteristics similar to Pipeline and eBX.