SEC Approves New York Stock Exchange Plan for Retail "Dark Pool"

The SEC has approved a pilot program designed to attract retail stock orders to the New York Exchange. The program will "create a new class of retail liquidity providers that would be allowed to reserve and keep hidden bids and offers for smaller investors with prices that beat those in the rest of the market," according to

. Essentially, the NYSE's Retail Liquidity Program, as it is known, will create a quasi-dark pool for retail investors on the New York Stock Exchange, which is operated by NYSE Euronext

. The company, however, is not calling it a dark pool, which is a private venue where orders can be executed without displaying bids and offers in advance. “The big difference in the program is it's still operated in the exchange framework,” Joseph Mecane, executive vice president and chief administrative officer for U.S. markets at NYSE Euronext, told Bloomberg. “While we are able to segment retail customers, all the rules about how we treat retail customers differently are filed and standardized and submitted to the SEC,” he said. “Dark pools can discriminate with complete discretion.” The program should allow retail investors to generate price improvement of fractions of a penny on their orders being routed to the NYSE. Larry Tabb of research firm Tabb Group LLC told Bloomberg, “Retail orders are going to be executed basically within a dark pool within the exchange. You won't be able to see those orders because they're going to get a better execution price than the displayed price. You're going to wind up creating a subpenny market within the market that won't be displayed.”