* Regulator IOSCO issues paper on dark pool trading
* Europe's dark pools not worried
* The Commission aims to report next year
By Luke Jeffs
LONDON, Oct 28 (Reuters) - Europe's largest dark pool Chi-X Europe has played down plans by international regulator IOSCO to limit the activities of these opaque trading systems by making them more transparent.
Global regulatory body the International Organisation of Securities Commissions (IOSCO) issued on Wednesday a consultation paper that outlined proposals to "minimise the adverse impact of the increased use of dark pools".
But Chi-X Europe's director of regulation Denzil Jenkins said on Thursday: "As a set of broad principles, I think few would have any objections to these guidelines. They're useful but they don't add a great deal to the debate in Europe."
Europe's dark pools - such as Chi-X Europe, Smartpool and Turquoise with the investment bank dark books - spent much of the early part of this year working with the Committee of European Securities Regulators.
CESR was consulting market practitioners ahead of its submission in late July to the European Commission on possible changes to Europe's equities laws, including those affecting dark pools. The Commission is set to publish the results of its consultation early next year.
European dark pools have grown in the past five years backed by investors who like these platforms because they limit the trade data shown to the market at large and, therefore, reduce the chance of losses from market impact.
Some of Europe's largest exchange groups have backed rule changes that will force dark pools to become more transparent, but the dark vendors have countered that these would deprive investors of a powerful trading tool.
"The discussion in Europe has been largely un-informed," said Jenkins.
Exchange trade body the Federation of European Securities Exchanges said late last year as much as 40 percent of European equities trading was being conducted away from exchanges.
The dark pools rejected this claim and have since started publishing their trading figures, which suggest that in an average month less than 3 percent of European trading takes place in the dark.
Hans Hoogervorst, the chairman of IOSCO's technical committee that produced the paper, said regulators have to keep pace with market change.
"One such innovation is the expanded use of dark liquidity and the development of so-called dark pools and dark orders, however while these innovations may meet a demand in the market, they also raise regulatory issues that merit examination," said Hoogervorst.
IOSCO has given third parties until January 28 2011 to make their submissions.
Chi-X Europe is the largest dark pool in the region, with 30.8 percent of European dark trading this month.
Turquoise, owned by the London Stock Exchange, has 17.1 percent and Smartpool, owned by NYSE Euronext, has 13.4 percent, according to data from Thomson Reuters. (Editing by Jon Loades-Carter)