Dark Pools and Reg NMS

Discussion in 'Order Execution' started by monstimal, May 13, 2011.

  1. I've looked around for the answer to this but cannot find one with certainty. If you know or could provide a link it'd be much appreciated. Can a dark pool trade through a protected quote?

    I know a dark pool's quote is not protected but I was wondering if a dark pool had two crossing orders at $10.07 but the current inside on NASDAQ was $9.99 x $10.03, can the dark pool go ahead and print it's orders at $10.07?
  2. pr66067


    >>Can a dark pool trade through a protected quote?

    Normally, no.

    Buy they might be able to accept an Intermarket Sweep order.

    By sending the Intermarket Sweep the sender certifies that he is simultaneously sending enough size to the protected quotes to take them out, thereby allowing the execution venue that receives the Intermarket Sweep to assume that any protected quote that he thinks he sees in the way are really in the process of being taken out.

    Without Intermarket Sweep orders it is very hard to have a smart-router that slices up an order and sends its parts out simultaneously (because some of the destinations refuse to trade through others).

    An execution venue that accepts Intermarket Sweep (in this case the dark pool) has to perform extra surveillance to make sure that their customer isn't abusing the ISO (i.e. that they actually do send simultaneous orders to the protected quotes).

    The execution venue isn't required to support Intermarket Sweep orders, and I don't know which (if any) dark pools actually do.
  3. fanews


    The fact that the financial regulaorst or the self regulation organization allow dark pools and hidden orders etc and frontrunning or oders via HFT and naked access etc. naked shorting mean the market regulators is full of shit.