Private trading venues called dark pools face a probe from the Financial Conduct Authority (FCA), as the City watchdog wants to investigate potential conflicts of interest.
The FCA’s business plan for the year ahead yesterday set out a range of probes across financial services.
“We have been considering the risks around dark pools and will also continue to increase our knowledge of the conflicts of interest that may be inherent in the operation of dark pools and explore how firms are managing them,” it said.
Dark pools have gained unwanted attention in the past year, with some authorities accusing their operators of wrongly favouring large clients above small traders, and failing to protect less sophisticated investors.
The FCA is also investigating sales at the other end of the market, with retail investment products.
Tighter rules on investment advice have encouraged more banks and other firms to offer non-advised products, which the FCA will probe.
“We want to see how consumers behave when they are making their own investment decisions and how firms support consumers in choosing products that are suitable for their circumstances,” the document said.