Dark equity trading has slumped after the securities regulator introduced a rule in May banning such trades unless they beat the best public quote.

Volumes of dark trades plunged 40 per cent from the previous two months after an Australian Securities and Investments Commission rule was enforced on May 26, said Calissa Aldridge, a senior specialist in ASIC’s financial market infrastructure unit, referring to non-block transactions.

The regulator now requires such trades to achieve a better price than public venues by at least one tick size, or occur within the midpoint between bids and offers. Dark pools are private venues that don’t display prices until after trades take place.

‘‘The charts that we will eventually publish show how it just drops off a cliff,’’ Ms Aldridge said about trading volumes in an interview in Sydney today. ‘‘We see this as a result of the new rule we put in place.’’

Dark trading had accounted for 25 per cent to 30 per cent of Australian equity market volume, according to an ASIC study released in March. The venues were set up to allow investors to buy and sell large parcels of shares without having news of their orders move the price.