Ways around IOI restrictions

Recall that the SEC has taken up the issue of dark pools and specifically the widespread practice of using indications of interest (IOIs) as a service to customers. The agency has come forth with two suggested changes (to Reg NMS and to Reg ATS) that seem intended to force brokers to convert IOIs into actual orders to be sent to exchanges.

Traders suggests that the move will not really work. One executive told the magazine: "Anyone who believes these new rules will result in new information being made public is kidding himself. Behavior will simply change." One could argue that the very goal of IOIs is to help clients stay anonymous and trade with more efficiency. Some say that broker-dealers will simply begin "use of immediate-or-cancel orders to 'ping' electronic sources of liquidity."

LiquidNet has already upgraded its system to embrace a "pinging model." This is a really tricky area, and we'll likely not see a definitive rule for some time. But you get the idea that the industry will work around whatever impediments come its way. 

For more:
- here's the Traders article

Related Articles:
IOIs to end up in regulatory crosshairs?
Dark pools grapple with IOIs
IOIs continue to roil dark pools