08.03.2017

Senator Warner Wants More Dark Pool Scrutiny

 

One U.S. lawmaker wants even more light shed on dark pools.

Last week, U.S. Senator Mark Warner wrote a letter to the Financial Industry Regulatory Authority (FINRA) requesting the agency to increase its observation of dark pools and how they conduct their business.

As first reported by Reuters, Warner said that FINRA had already taken positive steps in regulating the opaque non-public trading venues since 2015 when it issued best execution guidance. But, in his opinion, the agency hasn’t done enough yet to protect individual mom-and-pop investors.

Without “affirmatively enforcing the Best Execution Rule subject to the detailed FINRA guidance, investors cannot be assured that brokers are routing their orders to venues that will offer best execution quality and pricing,” Warner, a Democrat, said in the letter, which was seen by Reuters.

The best execution rule requires broker-dealers to send orders to the trading venue that will ensure the best possible price for a security.

A spokesman for FINRA told Reuters the regulator had received the letter and would respond in due course.

FINRA should focus more on broker-dealers that operate their own dark pools, given the inherent conflict of interest in routing customer orders to these internal venues versus competing marketplaces, Warner added.

 

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