Article An Introduction To Dark Pools

T2W Bot

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Dark pools are an ominous-sounding term for private exchanges or forums for trading securities; unlike stock exchanges, dark pools are not accessible by the investing public. Also known as “dark pools of liquidity,” they are so named for their complete lack of transparency. Dark pools came about primarily to facilitate block trading by institutional investors, who did not wish to impact the markets with their large orders and consequently obtain adverse prices for their trades. While dark pools have been cast in a very unfavorable light in Michael Lewis’ bestseller “Flash Boys: A Wall Street Revolt,” the reality is that they do serve a purpose. However, their lack of transparency makes them vulnerable to potential conflicts of interest by their owners and predatory trading practices by some high-frequency traders
Rationale for dark pools The current controversy surrounding dark pools may lead one to think that they are a recent innovation, but they have actually been around...
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No Risk Trader

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Dark Pools etc..

Well said. I would add, the use of dark pools shows that size of the portfolio does not prevent clients from getting taken advantage of and the use of what is now called internalization is the same as the idea that no haggling car pricing means the buyer is getting the best price, it doesn't. Nor does a firm offering so-called best price quotes mean you shold not know all the quotes being offered for a stock. This tyoe of brainwashing is why the term Arbitrage is practically unknown. They don't want clients making spreads=arbitrage opprotunities by taking advantage between the inter-exchange price differenced. I'm old enough to remember getting access to quotes from each exchange was easy money as the quotes for the same stock would be different, so you could by in Philly and sell in Chicago for example and keep the difference. Dark pools simply mean institutional equity buyers are now exposed to what bond buyers traditonally are...fronting or worse; price rape. Technically their is no need for a Dark Pool. The FLEX OPTIONS market provides the effective means to execute block trades without market disruption. However for reason not clear, it is not marketed by the OCC for its benefits.
 
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