On 15 May 2015, the Securities and Futures Commission (SFC) published its consultation conclusions concerning the regulation in Hong Kong of dark pools, largely adopting the recommendations set out in its February 2014 consultation paper. Dark pools (also known as alternative liquidity pools or ALPs) are electronic trading systems through which the crossing / matching of orders involving listed or exchange traded securities is conducted with no pre-trade transparency.
With effect from 1 December 2015, the Code of Conduct for Persons Licensed by or Registered with the Securities and Futures Commission (Code of Conduct) will be amended so that (amongst other things):
- Individual investors (including individuals that are professional investors under the Securities and Futures (Professional Investor) Rules (PI Rules)) and their investment holding corporations (unless those investment holding corporations are themselves professional investors under the PI Rules) will not be allowed to trade through dark pools; and
- Orders received from the users of dark pools (i.e. agency orders) must be given priority over proprietary orders (including client facilitation orders) when determining order priority in dark pools.