With flash-order programs likely to be banned in their current form, U.S. regulators are expected to soon turn their attention to indications of interest, a practice some market participants see raising similar issues around information leakage.

The Securities and Exchange Commission this month voted to propose a ban on controversial flash-order routing programs, but the proposal didn't address IOI programs, in which exchanges look to execute customer orders on off-exchange trading venues.

However, following on public comments from James Brigagliano, co-acting director of the SEC's Division of Trading and Markets, regulators plan to examine IOIs amid continued investor concerns.

"Actionable IOIs are simply a close cousin to the practice of flash orders and need to be looked at simultaneously," said Andrew Silverman, a managing director for Morgan Stanley.

All major U.S. stock exchanges offer order-routing programs incorporating indications of interest from what are known as dark pools, anonymous electronic trading venues used to execute big stock orders privately. Some dark pools send IOIs to exchanges, signaling available liquidity in a particular stock on the dark pool's book.

IOIs have been incorporated into exchange order-routing strategies that can function similar to flash-order programs - unfilled stock orders are sent to a group of market participants, who can act on the order before it is sent to another venue or canceled.

There are clear differences between the two practices. Unlike flash-order programs, IOI programs don't give dark-pool participants a view of the full order, and they must signal their available liquidity beforehand instead of being "flashed" on one side of the trade.

For exchanges, programs incorporating indications of interest can help avoid routing fees when unfilled orders are sent to other markets, while hanging on to market share.

Overall, exchanges' IOI programs account for a tiny amount of overall stock volume - less than 1% per day at the top four U.S. stock trading venues - and customers can opt out of having their orders checked against IOIs.

But the proliferation of high-frequency trading firms in the last year has some Wall Street brokers worried that IOIs could be used to front-run their orders.

They worry that dark pools backed by super-fast trading outfits could send IOIs to get a look at unfilled stock orders, choose not to act on them, and rush to trade against them before the orders are completed in another market.

Exchange officials note that they police their IOI programs. NYSE Euronext (NYX), which calls its program Arca Cloud, evaluates the performance of its participants daily and, if one participant consistently isn't following through on its IOIs, that participant is sent to the bottom of the priority pile.

The best participants in Arca Cloud fill 90% of the orders sent to them, according to NYSE Arca Executive Vice President Paul Adcock, with 40% at the low end - a range he said compares to other markets.

That percentage varies at electronic equity venues BATS Exchange and Direct Edge. Brian Hyndman, head of transaction services for Nasdaq OMX Group Inc. (NDAQ), said that, while his exchange utilizes IOIs, orders never go to non-displayed venues before public markets.

The SEC's examination of the IOI issue hinges on whether indications of interest meet the definition of a quote, since they can include the stock symbol, order size and a price.

If regulators decide to classify IOIs as quotes, they could become subject to order-handling rules and made part of the public centralized quotation system - and many dark pools may decide to stop sending them, according to exchange officials.

-By Jacob Bunge, Dow Jones Newswires; 312-750 4117; jacob.bunge@dowjones.com;

-By Geoffrey Rogow, Dow Jones Newswires; 212-416-2179; geoffrey.rogow@dowjones.com