Dark Pools

While there is no real "trigger" by which dark pools could directly put global markets at risk, the financial environment they create does merit concern. Because identities of dark pool traders are kept hidden from the Consolidated Tape System, certain information about trades and what those trades mean for individual share prices is kept hidden from the majority of traders, according to Traders Magazine. This is advantageous for traders who wish to keep the market from moving against them as they change positions.

However, as Hong Kong Exchanges & Clearing Ltd. chairman Ronald Arculli angrily exclaimed, this also fragments markets by creating a "two-tier system," where only certain traders have access to complete information about share price movements. Combine this with the fact that estimates already put dark pool trades at over 11 percent of U.S. average daily volume, according to the Wall Street Journal, and there's definitely a dilemma regarding price discovery for traders outside the more privileged circles.

This may not sound so terrible, because, as is the case with HFT or naked access, there's no direct "trigger" by which the market could be compromised. But consider that, as dark pool trade volume continues to grow, more and more will be put off the map in terms of what investors really understand about share price movements--or even about the exact price of a share. This could put more than a few holes in the government's ability to effectively monitor the marketplace, a problem duly noted by the SEC.

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