EU regulator says case for dark pool rules unclear

BRUSSELS Dec 1 (Reuters) - It is unclear whether "dark pools" or anonymous off-exchange share trading need regulating but tighter supervision of derivatives is inevitable, a senior European Union markets regulator said on Tuesday.

Some exchanges say dark pools need tighter scrutiny as they can affect the quality of broader market prices while dark pool users say volumes are low and benefit overall market efficiency.

Eddy Wymeersch, chairman of the Committee of European Securities Regulators (CESR) told the European Parliament the impact of dark pools and their trading volumes were confusing.

CESR is studying the phenomenon -- U.S. watchdogs are doing likewise -- and is set to report back soon.

"There are many things that are not very clear," Wymeersch told parliament's economic affairs committee.

"We are coming forward with opinions very soon. I am not going to say we should regulate. We need better figures to understand. I must confess I don't have the right answers," Wymeersch said.

The case for regulating off-exchange traded derivatives appears much clearer, with central clearing of contracts a key tool for cutting risk in the multi-trillion dollar sector, Wymeersch said.

The EU's executive European Commission has already outlined possible legislative measures which it will pursue next year, in line with broader efforts led by the G20 group of countries to shine a light on an opaque $600 trillion sector.

"We are very supportive of this paper. It goes exactly in the right direction. We would like to see work undertaken in that field," Wymeersch said.

But there is a need to make sure that central counterparties, which ensure trades are completed safely, backed by a fund in case of default, have enough financial resources to withstand shocks, he added.

Sharon Bowles, British Liberal chair of the economic affairs committee, said it was important to ensure that central counterparties do not concentrate risk too much, making them vulnerable in the next market crisis.

Central clearing of credit default swaps, a derivative found at the heart of the credit crunch, has already begun in the United States and EU but the G20 wants as many off-exchange traded derivatives to be centrally cleared, if not traded on an exchange or other electronic platform.

"Are central counterparties the solution for the future? I hope they are but we should be very vigilant. They are concentrating risk in the market," Wymeersch said.

(Reporting by Huw Jones, editing by David Cowell)

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