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Hong Kong SFC Proposes Restricting Retail Access to Dark Pools

Hong Kong’s Securities and Futures Commission said it will consult the public on proposed legislation to restrict retail investors from accessing so-called dark pools and enhance disclosure requirements.

Alternative liquidity pools, or dark pools, should be limited to institutional investors as the platform operators may not properly and sufficiently inform retail clients about risks, the SFC said on its website today. Retail orders, which are typically smaller than those of institutional investors, also risk having their orders not being transacted fairly, the regulator said in a statement today.

Dark pools, which don’t publish bids or offers on shares, were created to let large investors trade big blocks without having news of their orders move the price. They account for about 2 percent of the city’s total market turnover, the SFC said.

The city’s securities regulator also proposed regular reporting by dark pool operators on volume of trades by the largest users to the SFC. Operators should also provide regular transaction analysis to the platform users, according to the consultation paper. There should be a restriction on access to trading information by staff of dark pool operators, while non-proprietary orders should have priority, it said.

Ashley Alder, chief executive officer of the SFC, said in August that the city had a “last-mover advantage” when it came to writing regulations on dark pools and high-frequency trading. The consultation period will last until April 25.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at

To contact the editor responsible for this story: Sarah McDonald at

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