In a letter to the Securities and Exchange Commission, Morgan Stanley (NYSE:MS) said the SEC needed to reconsider their regulatory proposal, saying it was too “granular.”
The SEC is looking at dark pools in a more mechanical way, and so looks to regulate in that sense. For example, they want to treat what is called and actionable indications of interest (IOIs), as an actual quote.
Commenting on that way of thinking and potential action, William P. Neuberger and Andrew Silverman, who co-lead the global Morgan Stanley Electronic Trading unit, said, “Morgan Stanley believes that the real, underlying problem that needs to be addressed is the conduct of market participants.”
Other proposals from the SEC concerning dark pools would be to put in place the requirement that a dark pool must display quotes from 5 percent to 0.25 percent when the daily ATS volume threshold is met. They also want the identity of the particular venue where the trade was made disclosed.
The way the problems are being handled, according to the two, doesn’t get to the core issue, and so will do nothing to alleviate what the SEC is trying to fix.
It gets extremely complex when dealing with the overall dark pool issue, but the bottom line here is in the opinion of Neuberger and Silverman, the SEC is looking in the wrong area for fixes, and are probably offering only a band-aid rather then dealing with systemic issues causing the dark pool problems in the first place.
