That is interesting. But then what is the point of showing liquidity at all? Taken to extreme, which is better for the market - full transparency or full opacity?
Neither. Full opacity obviously wouldn't work unless we went to some crossing auction system like they do with Treasuries. The best system is to let each participant chose what is best for them in each situation. If I need to buy a ton right now why not let me show full size and sweep the offers? If I can wait all day why not let me show part of my order and work it at the bid... buying a little all day in bits and pieces? Why should it be restricted or regulated at all? Maybe we should take bluffing out of poker?
Showing size can sometimes make sense... there were many times I had to buy a multiple of the average daily volume (on an average day lol) in thin stocks. Sometimes the best way to get it done was to show the full size of the order and park it in the middle of the spread. For instance, say the stock is 10.10 at 10.35 showing 500 and I have to buy 400K. I might lift the offers to 42 or so, showing the market that there is a buyer. of course this will cost me because the market is now 34 at 44 or something like that. I might then put my remaining 350K at 40 and show the whole size. More often than not, it will get taken. Of course sometimes it goes 41 bid at 65 and you just screwed yourself but it's about what works more often on balance, right? Does that make sense? Sometimes I want to hide my size, sometimes I want to show it. Sometimes by showing it I can actually bring more liquidity into the marketplace. (not always though)
Ok, thank-you for your patience. I am asking if (volume) of trades only show (to all players) AFTER the trade in the dark pool. So even when regular market and dark pool all have match to NBBO, you think there is not the disadvantage to regular market players who only see volume AFTER the trade? Maybe I do not understand how volume shows in time?
I think that's a reasonable question. Fact is you can't even really trust the displayed volume in the regular market. If it shows 250 (* 100) on the bid a lot of that may be fake... if I hit that bid for 100 (*100) I may find only 50 (*100) print there and the rest go several cents below. Conversely, if it shows 1 (*100) on the bid you may sometimes see thousands print there as the buyer is much bigger than he is showing. The time and sales tape tells the truth... every trade done shows with the actual size whether dark pool or regular ECN, but you can't trust the displayed size at all. With the dark pools you can't see the size at all, or even know if there are orders are specific levels. I don't think it is a serious disadvantage to participants, but it can be a surprise. Let's say i want to push a stock up and I see thin offers... I may decide to buy a ton on the offers and see if I can sweep it up 20 cents. Much to my dismay, a larger seller was hiding... either in the dark pool or a regular ECN but not showing his size... so I only lift the stock 02 before it collapses on me. C'est la vie. Some days you're the dog, some days you're the tree. Keep asking if that doesn't make sense.
I will read your reply and think about that. I appreciate you take your time to explain this when you not paid to do that. Thank-you!
Its obvious that equity markets are rigged to favor Investment Banks and large funds. Dark Pools and HFT are just two examples where Big Guys stack the deck to ensure they get the best possible bid/ask, or move the highest volume with the least slippage. Even the self-proclaimed expert on the thread admits that, but in the same breath, says its not such a bad thing! The problem of size is liquidity. Fair and open markets means bigger players hold bigger risk due to the nature of their (relatively) illiquid positions. Tough. That's life. Why should the system be gamed to screw over the smaller guys so Big Volume can get the best deal? I'm for most of your suggestions, but oppose aggressive position limits. Being a free-marketeer, IMO, its incumbent on larger players to deal with their size and not petition the scorekeeper to change the rules. Limits that prevent one or a few groups from 'cornering' any one instrument is good. Similar to Anti-Trust Laws in America. Smash the monopolies = bad for the consumer. But, below that threshold, I'm lassie faire
fucking idiot. "dark" pool is the alternative to the established exchanges. To name it "dark" is to give it a bad name, a rumor-spreading technique used by NYSE and Nasdaq. They see a competitor and try to destroy it. Vicious. If your orders to NYSE and Nasdaq are routinely routed to GS before being made public, what do you think the exchanges are doing??? They are making money by selling your orders to GS. Why would GS pay the exchanges for your orders? It front-runs them. They don't call it "front-run," because it has a bad meaning, they call it "high-frequency trading." High my ass, it's called stealing. So you get fed up with the crooked exchanges collaborating with big players like GS, you decide to bypass the crooks and buy directly from the sellers. Instantly you get a bad name, you are running a "dark pool," which sounds like you are doing some illegal underground activities. Well, that's exactly what they want to portray you, because they want to get rid of you, so that they can have the monopoly. If you think those crooked exchanges are not bad enough, think of this fact: Madoff was the chairman of Nasdaq for a long time and taught a few tricks to those crooks currently working there.
You agree equity markets are rigged, then act like nobody gets screwed. Which makes your argument (that it's all roses!), nonsensical. By definition, when any game is rigged, one side is favored over the other. So which side is favored? And which isn't? I'll take the time to answer that question. The side that has access to and employs dark pools and HFT has a discernible advantage over the side that does not. You may have worked for a large Pension Fund (aka "The Public"), as you say. But Not All Pension funds are Large, or have the resources to capitalize on HFT or Dark Pools. So, in that case, your Large "Public" Fund, would screw the smaller, less capitalized "Public" fund. Or, in reality, many of them. You don't understand my point about large order probing or HFT. A large order (institutional size), gets broken into smaller pieces, which are still LARGE relative to volume sitting on the bid/ask. How it relates to HFT: large orders can't probe the market successfully, because HFT seeks hidden volume (market orders) and front-run it. The Big Guys can't get use limit orders for Big Orders. Retail will front-run that. And market orders broken into pieces (FOR BIG ORDERS), get front-run by HFT. So Dark Pools are used. Get my point? You say that Retailers can access Dark Pool liquidity and T&S information? Could you please tell us where we can find that info? The difference between ice-berg orders on the Naz and Dark Pools - hidden orders on the NAZ get front-run by HFT!!! There's no HFT in Dark Pools! So, once again, the Big Guys trade in Dark Pools, so they don't get caught by their own traps laid to ensnare small traders. It's okay if you get irritated, btw. I don't really care.