The volume of stocks traded in secret “dark pools” is soaring in Europe. What could go wrong?

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The volume of shares traded outside of public exchanges is growing fast in Europe. Trades on so-called “dark pools” jumped 45% over the past six months, according to a new report (pdf) from Fidessa, a technology firm. These off-exchange venues processed €207 billion ($283 billion) in the six months to September, accounting for around 4% of total trading, Fidessa reckons.

Others put the market share of dark-pool trading at 7% or 10% across Europe, with the highest percentages in major trading hubs like London. (It’s hard to know for sure, because it’s hard to see in the dark.) These secretive venues in Europe are quickly closing the gap with their American counterparts, which account for perhaps 14% of all US trading.

What does it matter? Big asset managers like dark pools because it allows them to trade big blocks of shares cheaply and anonymously, without broadcasting the orders to the rest of the market, be it other traders or algorithm-driven robots. In certain situations—typically buying or selling in big lots—this lets them fetch better prices and generate higher returns for their investors, they argue.

Public exchanges are cross at losing volumes to lightly-regulated dark pools, urging regulators to limit their growth. Trading in dark pools in Australia and Canada is allowed only if the price of shares traded there is better than on public markets. This serves as the model for rules currently being debated in the EU, while American regulators are instead pushing for more detailed reporting requirements by dark pools.

The merits and risks of dark pools are hotly debated, with proponents extolling their efficiency and the competition they create with public exchanges, which they say lowers prices for all investors. Critics fret that a lack of transparency endangers financial stability by adding opacity and complexity to markets already struggling to cope. Given the shenanigans that take place in “lit” public markets, they argue, shouldn’t we be more worried about how traders behave when the lights go off?