Recent developments that call into question dark pool trading activities may not deter institutional investors from seeking out alternative trading venues and taking full advantage of their benefits. The most recent development saw the Securities and Exchange Commission fine dark pool operator eBX ­— which runs Level ATS — $800,000 in October for allegedly failing to protect customers’ confidential trading information. But if more such cases arise, investors will likely start looking more closely at whether the venues deliver what they promise.

That’s the finding of Woodbine Associates, a capital market research and consulting firm based in Stamford, Connecticut. It advises clients on dark pool selection and released a report in September on current dark pool trading activity.

Despite SEC charges brought against eBX, “institutional investors need dark pools more than ever today,” says Matthew Samelson, principal at Woodbine Associates. Samelson points out that because today’s traditional display markets such as the New York Stock Exchange or Nasdaq trade at lightning-fast speeds, the buy-side institution that is not a low latency or high frequency trader is at a distinct disadvantage.

“It behooves these institutional traders to trade in dark pools where they have some control over who they interact with, can have anonymity and more protection against leakage than one gets in the display markets and thus, can achieve some kind of trading price improvement,” he said. Currently, there are more than 40 dark pool trading venues operating in the United States.

As an example of dark pool benefits, Samelson said that a firm that wishes not to interact with high frequency trading flow or with another type of counterparty can — depending on the dark pool they use ­— utilize controls to achieve that goal.

According to “Dark Pools: Characteristics, Operations & Liquidity,” an analysis of 25 different dark pool trading venues issued by Woodbine Associates in September, off-exchange transactions account for 27 percent to 34 percent of all U.S. equity securities volume, with dark pools representing a smaller but persistent proportion of that volume, growing from 8 percent of the consolidated tape share volume in 2008 to approximately 13 percent today.

But if institutional investors continue to trade in these opaque trading venues, is there a way for them to avoid questionable practices?

Samelson says that for now, their options are limited. “If someone misrepresents something to you, either by omission or intentionally, there is no way you can find out what’s really going on, short of doing your own internal audit of the situation,” he said.