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Dark Pools and High Frequency Trading For Dummies by Jay Vaananen

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Chapter 6

Regulating Dark Pools

In This Chapter

arrow Focusing on the importance of regulation

arrow Comprehending the impact of regulation in the United States and Europe

arrow Familiarising yourself with the major regulatory players

The world of dark pools and high frequency trading (HFT) has come under the spotlight of regulators and legislators in recent years. (Legislators are the ones who create the laws that govern how the markets operate, whereas regulators are the organisations whose responsibility it is to monitor and enforce the rules made by the legislators.) This trend will only continue. In fact, the single biggest factor affecting the market is regulation. Without a doubt, dark pools and HFT will face more regulation, and certain market participants will try to find ways of getting around the new legislation or using it to gain an advantage.

When you have such a wide world of possibilities, problems can and do arise, all related to price. How can you be sure that you get the best possible price? What if the stock you want to buy is trading at a better price in another venue, but you don’t have access to the venue with the better price? It’s a bit like the question, ‘If a tree falls ...

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