Overview

During the past two or three years, a significant number of alternative trading venues have evolved in Europe which competes with traditional stock exchanges. The so-called “dark pools of liquidity” are a very peculiar  type of alternative trading venue. The term ‘dark pool’ describes a non-transparent trading facility which is designed to allow for a silent and anonymous trade in large blocks of shares. Recently, dark pools have attracted increasing public attention. The mechanism, benefits, risks and the legal foundations often remain rather obscure.

The emergence of alternative trading systems with a pan-European scope of activities is mainly the  result  of the implementation of the European Markets in Financial Instruments Directive (MiFID). MiFID has abolished  the “concentration rule” which still existed in some EU countries and which required orders to be executed  via a  stock exchange. In addition, MiFID enables alternative trading systems to offer their services on a pan‑-European basis with just a single licence. In MiFID terminology, alternative venues are called “multilateral trading facilities” or MTFs.

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