I came across the term ‘Twilight Pool’ for the first time this week. The basic idea is that it is essentially a dark pool that lights up certain pieces of information, or at certain times, in order to provide users with some idea of what is or isn’t lurking there. The advantage is that it enables participants to see if the type of liquidity they’re seeking (either in terms of name or size) is likely to be in that pool. Obvious applications would be in the new-fangled SEF zone where everyone is scratching their heads wondering how and where illiquid contracts are going to trade. This is even more relevant if the lighting can be customised according to who is looking. In this way the prices can be ‘painted’ to reflect, for example, the credit status of a particular counterparty. Another application might be with the broker crossing networks that MiFID is looking to make more transparent with its proposed 4% and 8% dark trading rules. Either way, it proves yet again how markets will always be able to innovate faster than regulators can pass laws.