Dark Pools

Discussion in 'Trading' started by SH_DW, Apr 14, 2008.

  1. SH_DW


    Is anybody here pissed off that dark pools are allowed to deliberately circumvent the exchanges? The average Joe Trader will now have an impossible task of analyzing what REALLY is going on in these markets IF these hidden pools continue to grow. You can kiss your great software tools goodbye. A you will have is price +time. All other data wil be meaningless.

    Is there any other info out there concerning this phenomena which seems to contradict EVERYTHING that is happening w/ globalization +transparency?

  2. trom


    They still report to the tape.

    But, yes, I find them very irritating. If you know how to route your orders, it's possible to trade with them, and hopefully it will be even easier to hit them in the near future - ARCA and NSDQ supposedly will cross with some of them.
  3. SH_DW


    You sure of that? If they do report to the tape, EVERYTHING, then there is -ultimately -transparency. Then I have no issues/problems. All my analysis work relies on full data transparency from ALL PLAYERS, big or small. Is everything reported real time??

    Can someone else confirm this??

  4. They are on the tape. It is just you will never know it is on the tape because it will be in a much smaller quantity dispersed over the daily trading. If you were smart enough to know which institutions were buying or selling at a given time, you lost that advantage with dark pools.
  5. trom


    You can tell if dark liquidity is trading by watching the prints. You have know what exchange each ECN will print through. For example, on my platform ISLD/NSDQ will print the quote/time/price with "i" and NAS by the print. Many dark books print NAS, as well. Here's a scenario where I can tell there is a dark book:

    Trades are going off at the offer, and the inside offer is FLOW, EDGX, and ARCA each for 100 shares.

    I see 500 shares print PSE (ARCA w/ reserve size)
    I see 100 shares print TRF (FLOW)
    I see 1000 shares NAS (dark book)
    I see 400 shares CIN (EDGX w/reserve)

    The 1000 shares had to be a dark book, because no other ECN at the inside would have printed NAS.

    Sometimes the dark pools are for large size, sometimes they're for 100 shares. With practice you can find them and if you know how, trade with them.

    I do wish they would go away, though. It's harder to trade with hidden liquidity.
  6. Regulators would care, however, regardless of whether individual investors have concerns. In fact, Reg NMS modified a 1997 regulation by lowering from 20% to 5% the ceiling on average daily volume of any given stock that ATSs are permitted to represent before being required to disclose information to the public market, Lee says.

    I wonder if this aspect of Reg NMS is being followed with respect
    to AST's. For Example: On April 14,08 GooG traded 3,842,503 shares. This is way down from its daily average of 7,546,084.
    I wonder how many shares were traded "in the dark."
    There has to be some info regarding the top volume issues on Pipeline and Instinet as well as the others.