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SEC chief takes aim at predatory traders in ‘dark pools’

By
Kevin Dugan
Published March 25, 2015, 9:43 p.m. ET

She’s going to need a bigger boat.

Securities and Exchange Chairwoman Mary Jo White wants to hunt down sharks in lightly regulated “dark pools,” where predatory traders are known to lurk.

White proposed a new rule on Wednesday that would require high-frequency trading firms to register with the Financial Industry Regulatory Authority, a broker watchdog, and submit a daily paper trail on their trading activities.

While the stricter rule doesn’t outlaw any particular kind of behavior, it creates reams of data that regulators could use to crack down on unscrupulous traders, Haim Bodek, a former Goldman Sachs trader who founded consulting firm Decimus Capital Markets, told The Post.

“You would expect firms that are heavily predatory in these dark pools to not be happy with that arrangement,” Bodek added.

Finra supported White’s rule to “eliminate the registration exemption,” said George Smaragdis, a spokesman for Finra.

There’s a 60-day public-comment period before the SEC rule is made final.

White first floated the idea in June during a lunch with industry bigwigs like Nasdaq CEO Robert Greifeld, saying the lack of transparency in the stock market can “sometimes distract from market quality.”

“Transparency has long been the hallmark of the US securities markets, and I have been concerned by the lack of it in these dark venues,” White told attendees at the lunch.

Dark pools have come under heightened scrutiny since Michael Lewis made a splash with the book “Flash Boys.” The author argued the market was rigged in favor of ultra-fast traders using the alternative trading platforms to turn a profit.

Last summer, New York Attorney General Eric Schneiderman filed a complaint against UK bank Barclays, saying that it courted predatory traders while advertising that its dark pool was a safe place to trade. Barclays has denied those charges and sought to get the case dismissed.