Brokers in Hong Kong should give their clients more choice over whether they want to be exposed to dark pools, its regulator has said.
Publishing the conclusion of a consultation held last year on dark pool regulation in Hong Kong, the Securities and Futures Commission (SFC) said clients should be able to opt-out of having their orders routed to dark pools (or alternative liquidity pools) but stopped short of requiring specific opt-ins.
It also individual investors, including professional investors and family offices, should not be allowed to use dark pools. At the recent FIX Trading Community Asia Pacific Trading Summit in Hong Kong, a large number of audience members responding to a poll said individual investors should be allowed to use alternative liquidity pools.
As part of its enhanced regime, the SFC also said that client facilitation orders will be treated as proprietary orders, giving them lower execution priority over agency orders.
Ashley Alder, CEO of the SFC, said: “The enhanced regulatory regime aims to provide a level playing field for all ALP operators in Hong Kong. We have developed the regime in light of practices in major international markets and the principles published by the International Organization of Securities Commissions.”
He added that the regulator will continue to monitor dark pools and may propose further regulations in the future in protect investors. The new rules are due to come into force on 1 December 2015.