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Hong Kong SFC said to survey brokerages on dark pool compliance

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[HONG KONG] Hong Kong's financial market regulator is querying brokerages and banks about their compliance with dark pool rules, according to people who have seen the questionnaire.

The Securities and Futures Commission sent about 70 questions that aim to ensure the required procedures for trading, order facilitation and monitoring in dark pools are being followed, said the people, who declined to be identified because the survey isn't public. The regulator called the survey a "check point" and gave two weeks to bankers and brokers to respond, the people said. The deadline is Tuesday.

The survey comes seven months after Hong Kong banned individual investors from using dark pools and forced them to place all the trades at Hong Kong Exchanges and Clearing Ltd, the city's only stock exchange.

While dark pool trading may help investors who wish to hide their strategy as offers are kept secret until the trades have taken place, the lack of transparency has fueled criticism that it's more difficult to tell if all users are being treated fairly.

SFC spokesman Ernest Kong said he wasn't immediately able to comment when reached by phone on Monday. Dark pools accounted for about 1.6 per cent of the Hong Kong securities market turnover in June, according to HKEx data.

BLOOMBERG