One could be forgiven for thinking a dark pool was an obscurely-lit body of water.

Of course, a dark pool in the context of trading and execution is, as explained by the Securities and Exchange Commission, “a type of alternative trading system (ATS) that does not display quotations to the public.”   They have grown in popularity over the past few years, particularly for alternative investment managers looking to shop around and get a one-up on price — and the competition.

It is largely due to this lack of transparency and their growing proliferation that the SEC has become increasingly concerned with regulating them in some form.   Just two weeks ago, SEC Chairman Mary Schapiro outlined a fairly comprehensive plan on how exactly the commission is looking to gain more oversight over dark pools.

“Although dark liquidity always has existed in one form or another in the equity markets, the commission must assure that the public markets and non-public trading venues operate within a balanced regulatory framework,” Schapiro said in opening remarks before a commission meeting on dark pools, in which James Brigagliano, co-acting director of the SEC’s trading and markets wing, provided testimony. “This means that as markets evolve, the commission must continually seek to preserve the essential role of the public markets in promoting efficient price discovery and investor confidence.”

Uh oh. More…