The AI provided a very good summary pulled from respected sources. So tell us when in the future 99.9% of the trading volume occurs in "private pools" with no information provided on prices and blocks of shares and a mere 0.1% of the shares are traded on the open market --- then do you believe we have a fair and efficient market for small investors and traders? I am not opposed to allowing "private pools" to operate and "only sell a stock once"-- however prints of the prices and blocks must be provided in real time to the market. This is the minimum required for running a proper market for publicly traded financial instruments. "Taking freedom away" means hiding financial information so things are done in secret rather than transparently in the open. This applies to the market as well as to government.
The example that you had given is that of a wholesaler/market maker. If that institution placed its orders directly in the market, even by slicing them into small lots the price could have shot up beyond 60. That explains why the institution approached this private room. BTW this is the reason we have 'block deals' on the exchanges. Is this not a threat to block deals? Aren't exchanges losing money due to the private rooms?
Good vs bad liquidity makes sense. If you’re a vanilla trying to move size, you do not necessarily want to tip off a hedge fund or another fast money shop. That’s about as old as time. I would be more concerned about Castle Oak only sourcing liquidity from DEI participants and wonder how that’s affecting their liquidity and executions against vwap They said it themselves, there are only ten players in that space. What are you possibly trading in the dark with such a limited amount of liquidity that’s benefiting from that business decision. You’re obviously not concerned about trading the SPY. That to me, if an issue, as a customer, would piss me off.
I wasn't aware liquidity had morality. Folks are either Time or Price sensitive and prioritize. It's all trade-offs there-after, and strategies that can mitigate / minimize the negative possible outcomes of their choices.
It shouldn’t but I guess it does at DEI driven liquidity pools. When you have a position in some odd instrument that requires a block order, you’re hoping that some dude you’ve never heard of in Indiana is going to take it down after some negotiation. When you take the pool of liquidity to ten small participants you’re not going to find what you’re looking for nearly as easily.
Like me explain it with an example: Let's say Bob is a long term holder of IBM and he puts in a sell limit order a 200. Steve comes along and puts in a buy order at market. Market maker buys the routing for Steve's order and stuffs it into a slow pipe. Then they buy IBM at 200 from Bob and Sell it to Steve for 200.02. The "liquidity" is higher because the same shares get bought and sold twice. And the "fill" is good because it's only a couple cents of the last order. In reality you just got ripped off by front running and the metrics you are using to evaluate are silly. Extra volume means nothing of those orders are completely dependent on other orders. Good fills mean nothing if the fill is front someone who just front ran you.