UPDATE 1-U.S. SEC mulls ways to shed light on dark pools-source

* SEC mulls limits on dark pool stock holdings

* SEC meets Wednesday to consider dark pool proposals (Adds details on proposals, comment, bylines)

By Jonathan Spicer and Rachelle Younglai

WASHINGTON, Oct 20 (Reuters) - U.S. securities regulators are considering ways to shed light on anonymous trading venues known as dark pools, including treating so called "indications of interest" as regular quotes, a source familiar with the Securities and Exchange Commission's position said on Tuesday.

Dark pools, private venues used to match large trades, have triggered concerns that stock pricing may not be transparent and that a privileged few are benefiting.

The actionable indications of interest, or so-called IOI messages, are used by dark pools and exchanges to communicate.

The SEC also is considering restricting the overall volume in a particular stock that can be hidden from the public. The SEC is mulling lowering the threshold at which dark pools must publicly display quotes to 0.25 percent in a single stock from the current 5 percent.

Alternative venues such as dark pools are required to publicly display quotes if they execute more than 5 percent of the overall volume in a particular stock's average daily volume in four of the previous six months.

The SEC is meeting on Wednesday to consider the proposals.

The agency also is mulling requiring dark pools to indicate where the trade is coming from so that the public has a better idea where trading actually takes place.

Dark pool operators warned of dire consequences if the SEC does not allow them to carry more than 0.25 percent in a single stock.

"That's a very low threshold. Going to 0.25 percent, you're really just trying to put a lot of dark pools out of business. It's very uncompetitive," said a dark pool official, who did not want to be named due to the sensitivity ahead of the SEC's meeting.

"All we have now are volume estimates. The SEC's first step should be standardized reporting of volumes, so that we can avoid any unintended consequences of new rules," the official said.

There are more than 40 U.S. dark pools, the largest of which are run by banks such as Goldman Sachs (GS.N). The anonymous trading venues account for an estimated 10 to 15 percent of U.S. equity volumes. (Editing by Carol Bishopric) (Reporting by Jonathan Spicer in New York and Rachelle Younglai in Washington, D.C.)