Illuminating the New Dark Influence on Trading and U.S. Market Structure

Discussion in 'Professional Trading' started by ASusilovic, Dec 3, 2010.

  1. Dark Pools are alternative trading systems (ATS) that do not display quotes in a traditional sense, like a stock exchange. Dark Pools are a complementary market in which the price of the trade being determined by the National Markets Bid/Offer (NBBO) spread but the execution of the order happens elsewhere in the Dark. In the U.S., the National Market System regulations (Regulation NMS) mandates that all trades regardless of venue, exchange or Dark Pool must cross within the NBBO—typically at the mid price. Dark Pools have been swathed in hype and attention for the last few years, while accounting for about 10–15% of all the transactions in the market. Why is it then that they have garnered so much attention? Why are there so many of them? What is their impact on trading and in the US marke

    Carl Carrie A global head of algorithmic products and neovest at JPMorgan in New York, NY.
  2. bears21


    because alot of traders retail and prop dont have access to these tools. so the playing field is a little off and the market isnt as transparent as it used to be. anytime you have an event where the big boys have an edge sometimes the little guy makes enough fuss and gets their voices heard. not to say anything will change but it cant hurt. kinda of like direct access many years ago the little guy finally got his way and had similar tools. these institutions have what we all know as an edge info. tools etc but just like most edges they widdle away
  3. sjfan


    .... why does the 'small guy' care? Dark pool allows institutional sizes to trade easier - how does that impact the 'small guy'?

  4. bkveen3


    Do Dark Pools affect price or is the market unaffected by their volume? If price isn't affected this is a way for institutional traders to trade size and not get killed on the fill. IF that's true it sounds like a fairly large advantage to me. If not ignore my complaint.

    This also allows for a more orderly exit by institutional money.
  5. bears21


    what if a little guy wanted to unload a decent size position that has no liquidity without disturbing the market. atleast they would have access to the same tools as the big instiutions. i mean an institution may have to sell 500k shares and needs to hide his intentions but the little guy might have to sell 10k shares and try to do it with as little impact as possible.
  6. bears21


    big advantage it makes it a two tiered market. if they would have to go to the displayed market it would be easier for traders to pick them off. dark pools are the secret society way of trading. but i also think other traders should have the same entitlements if i had a route for like 40 different dark pools i would be pumped.
  7. Bob111


    one thing is certain to me from years of US stock market observation-today we(the little retail guys) have ZERO transparency...
    dunno about you,but it's certainly impact my trading. are you happy to see executions for thousans of shares at your price or even below at some dark place,instead of exchange,where you sitting at? and you got no fill on this "winning" trade?
    i'm surprized, that ET member since 2005 don't know nothing about possible impact of the dark pools for retail trader. good luck!
  8. sjfan


    I'm not an equity guy. I trade fixed income on an institutional level where electronic platforms, voice trading, dark pools, etc all coexist. So I can appreciate the institutional reason for dark pool: liquidity in size.

    As far as what if small guys want to move size: if you move enough size, you aren't a small guy and you'd have access to those pools. If you are a liquidity provider (as a small guy sitting on the bid or offer) who can't consistently provide liquidity in size - then why should you be entitled to providing liquidity to block sizes at the same level that others who consistently provide such liquidity can? After all, they take execution risks that you aren't willing or able to.

    I can't help but wonder if dark pool is the boogie man that people like to blame.

  9. bears21


  10. bears21


    bottom line is anybody who shows price improvement should get a fill either lit or dark price improvement is price improvement trade throughs shouldnt exist thats how sweeps use to work top on down now if dark pool was showing price improvement over my order so be it but thats not the case regardless of size
    #10     Dec 3, 2010