Do a google search for guerilla, sniper, etc... In the context of algo trading... From my recollections dark pools are only for those people with BIG orders. Recently somebody told me to get an order cleared in a dark pool you need to be trading in the millions. The reason you have dark pools is that people like Buffett can buy, and Gates can sell without wildly affecting the market. Dark pools are a reality and they are growing. Exchanges are now getting into the act and offering their own dark pool.
I would imagine it's a necessity. Just try to trade 10K shares of a stock priced under $10 without immediately affecting the market and you have some idea of what the pros are up against.
How do you think these big funds did it 10yrs ago. They would call up there sales trader and he would make some phone calls to see if any of his other big clients were interested in taking the other side of the trade or pieces of the trade. Dark pools is just the next step, but same concept.
You know that is a really good point. It is the automation of that concept. Never thought of it in that context.
Buying 10k shares in a stock priced under $10 is simple... You can print 10k shares at the market on AMD or F without moving the stock a cent. Buying 10k shares on a stock that prints 15k per day... that's complicated.
It was tricky even on a stock that printed 150K a day, took quite some time to get filled at my limit, showing 200 shares at a time. First time I traded the stock, I accidentally hit market instead of limit and the slippage was 2.5% :eek:
That sounds like a lot of fun too... did you use Arca reserve to get out? Or did you manually post 200 shares at a time?
Hmmmm. So lets say someone has 1 mil shares to buy at $11 and price is now at 11.50. So someone will just give it to this guy bidding secretly at 11? i would assume its someone who is desperate to get out 1 mil shares because the market price is 50 cents higher!! Is this how it works? And is this why we see prints below and above the current market price? If it's all hidden, how would the counter party know that there is a $11, 1 million share bid?
ARCA reserve. Fortunately the stock gained 20% in a couple days, so the slippage on the buy didn't bother me so much after that.