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European lawmakers eyeing tougher regulations for dark pool trading venues

City A.M. Reporter
Dark pool trading venues may need more regulation to avoid harming public share prices for investors, European Union lawmakers said yesterday.

Dark pools are trading venues that allow buyers and sellers of large stock orders to avoid revealing pre-trade information and signalling their intentions to the rest of the market.

“The question is at what level they start to impact price formation and the efficient working of the marketplace for everyone,” Kay Swinburne, a British centre-right member of the European Parliament said. “It’s going to be important to look at infrastructure so we can put together some ambitious plans on how we want the market to look,” Swinburne told the EU economic affairs committee.

The European Union is reviewing its bloc-wide share trading rules known as markets in financial instruments directive or MiFID in light of the financial crisis and advances in technology.

Critics say MiFID has spurred competition in trading but at the cost of fragmenting market prices.

The EU’s executive European Commission is consulting on the review before putting forward amendments early in 2011 that will need approval from the EU assembly and member states. Maria Valentza, a commission official handling the review, said there was a need to check how dark pools affect overall share prices and market stability.