The SEC voted to issue proposals designed to shed greater light on “dark pools” of liquidity. Dark pools of liquidity are a type of alternative trading system (ATS) that does not display quotations to the public.

The number of active dark pools transacting in stocks that trade on major U.S. stock markets has increased from approximately 10 in 2002 to approximately 29 in 2009. For the second quarter of 2009, the combined trading volume of dark pools was approximately 7.2% of the total share volume in these stocks, with no individual dark pool executing more than 1.3%. Given the growth of dark pools, this lack of transparency could create a two-tiered market that deprives the public of information about stock prices and liquidity.

To make trading through dark pools more transparent, the proposals would:

Require generally that information about an investor’s interest in buying or selling a stock be made publicly available, instead of just to a select group operating with a dark pool.

Require that dark pools publicly identify that it was their pool that executed the trade.

The dark pool proposals are intended to enhance transparency and promote fairer, more efficient markets for U.S.-listed stocks.