With the ominous-sounding name, 'dark pool', it is not surprising that this latest fad in the investment world has attracted the attention of regulators. A dark pool is an electronic trading platform that allows investors to secretly trade a large amount of stock without their identities and trading volume being revealed. This benefits big players who do not want to let other large investors know what they are doing. But dark pools are being eyed nervously by regulators because of concerns they lack transparency and give some investors an unfair advantage over others. After the horrific experience with subprime mortgages and collateralised debt obligations, whether a Star Wars-sounding investment vehicle like a dark pool will be allowed to run rampant in the market remains doubtful. The government and the stock exchange are looking at what the United States and other regulators overseas will do about dark pools before deciding what to do with them. Some dark pools are targeting trading of Hong Kong-listed stocks. The issue came under the spotlight after the Singapore Exchange last week announced it would team up with Chi-X Global to create a dark pool facility that would allow institutional investors to trade Hong Kong-listed stocks offshore as well as shares in Australia, Japan and Singapore. Brokers said some dark pools had been operating in the city as over-the-counter businesses but had not drawn much trading volume. The proposed Singapore Exchange-backed dark pool may be different as it is the first to have a direct link with a big exchange. No details have yet been given about the launch of the pool and related regulation, but an official of Chi-X Global boasts the planned platform could capture 5 to 10 per cent of Hong Kong's market liquidity. Our friends in government and at the exchange have not yet seen it as an immediate competitive threat. Hong Kong Exchanges and Clearing could easily team up with an operator to launch the same facility. A senior government official told White Collar the local administration was more concerned about regulatory issues related to dark pools. 'Dark pools are subject to the Securities and Futures Commission's regulation and we are tracking international regulatory developments and listening to views from the industry,' the official said. In the US, dark pools face closer scrutiny after Securities and Exchange Commission chairman Mary Schapiro said in June she was worried about their impact on 'price discovery', particularly their use of pre-trade messages that tip off certain market participants to upcoming orders. She said such practices meant the public did not have fair access to share prices. Corporate governance In this week's video report, Paul Winkelmann, the president of the Hong Kong Institute of Certified Public Accountants, talks about corporate governance. The industry body is hosting the annual Best Corporate Governance Disclosure Awards to choose the companies with the highest standards of disclosure in their annual reports. Nominations for the competition, which is marking its 10th year, will end this Friday.