To anyone not steeped in the lingo of Wall Street, a dark pool may sound like a poor destination for a leisurely swim. The term, however, has nothing to do with taking a morning dip, but average investors will benefit from understanding why dark pools exist and how they work.

Dark pools, also known as “dark pools of liquidity,” refer to private platforms for trading securities, unlike public exchanges such as the New York Stock Exchange or Nasdaq composite. They are used by professional investors to buy or sell large quantities of stock, similar to stock exchanges.

According to Reuters, there are about 40 active dark pools that compete with 11 public exchanges. Unlike stock exchanges, however, trades executed through dark pools lack transparency, so the size and price of the order aren’t known.

And there’s a reason for that, says professor Haoxiang Zhu of the MIT Sloan School of Management. “Certain investors, such as institutions, simply need nondisplayed venues to trade large blocks of shares without alarming the broad market.”

Zhu says dark pools can aid in “price discovery,” the process of determining the price of an asset through interactions between buyers and sellers, helping to create more efficient markets.

Regulators see it differently, arguing that dark pools may harm price discovery and lead to shady dealings. Trades executed within dark pools are anonymous, and orders don’t get reported until after they’ve been executed.

Dark pools aren’t a new phenomenon, having first appeared in the 1980s. They began to proliferate with the passage of the Regulation of Alternative Trading Systems rule in 1998, and expanded further with the passage of the Regulation National Market System by the Securities and Exchange Commission in 2005.

Operators of dark pools, which include many large Wall Street firms, exchanges and electronic market-makers, have seen increased scrutiny after the publication of Michael Lewis’ book “Flash Boys,” which makes the case that dark pools have allowed high-frequency traders to rig the market against customers.

Regulators have sought to crack down on illegal activities that they say harm investors. In the past year, the SEC has settled several enforcement cases against operators of dark pools.

In January, Barclays and Credit Suisse agreed to pay a combined $150 million to the SEC to settle allegations that the banks had deceived investors. The SEC charged that Credit Suisse and Barclays failed to properly supervise their dark pool exchanges to prevent “predatory” and “opportunistic” traders from conducting trades in violation of federal securities laws.

In August, the SEC took action against Investment Technology Group, fining the brokerage firm a then-record $20.3 million to settle charges that it ran a secret trading desk that profited from confidential information with its dark pool. In January 2015, the SEC fined UBS $14.4 million for allegedly favoring some customers over others on its alternative trading systems, or ATS.

SEC Chairwoman Mary Jo White told reporters that the broker-run ATS remains a focus of her agency. “I think you’ll see more dark pool cases,” White says.

That’s not surprising to critics of dark pools, who suggest their proliferation has made financial markets less democratic. Rather than helping ordinary investors, dark pools instead favor a small group of insiders.

Critics also say dark pools have many of the same drawbacks that helped deepen the 2008 financial crisis: lack of transparency and insufficient regulation. What’s more, the sheer trading volume being handled by dark pools poses a threat to the global financial system and economy, they say.

Backers of dark pools see things differently. One such advocate, D. Keith Ross, owner of PDQ ATS, told CNBC that not only are dark pools are regulated, but the SEC has recognized the need for institutions to process large trades without displaying the whole order “to maintain long-term confidence” in the markets.

Other advocates argue that average investors, should they invest in mutual funds or participate in pension funds, also benefit from the efficiencies of trading that dark pools afford.

Despite the controversy surrounding them, it seems many traders still prefer to conduct transactions through dark pools rather than through open “lit” exchanges. Meanwhile, regulators vow to continue to get to the bottom of any wrongdoing.

In announcing last month’s settlement with Barclays and Credit Suisse, White said, “The SEC will continue to shed light on dark pools to better protect investors.”

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How Dark Pool Investments May Affect Your Portfolio originally appeared on usnews.com