Remember commissions and other charges are only one part of the actual cost of the trade. Market impact is much bigger and my experience was that market impact was minimized when we could cross in a dark pool. yes it's more expensive but I'd rather pay some fraction of a penny than do a ton of the order 8 cents under the current bid.
we have to get rid of the term "dark pool" before continuing the argument. "Dark" has a negative connotation. we may call it "Alternative Exchange." Those who label any buying/selling outside their casino "dark pool" are losing business, so they start the rumor and spread the rumor. I suspect the rumor was started by NYSE and Nasdaq. This reminds me of the rumor started by American pharmaceutical companies about the drugs sold in Canada (remember drugs in Canada are much cheaper and many American citizens go across the border and buy them in Canada). The rumor is: The Canadian drugs are unsafe! Don't use them! They are dangerous! Well, it turns out the drugs sold in Canada are made by the same American pharmaceutical companies who started the rumor!
Some of you folks have been reading too much zero hedge. Sigma X or any dark pool is not 'bad.' I have found I am able to get filled at my price more often there than arca, nyse, or whatever. And how else in the world does one expect Fido, Vanguard, etc to get their large blocks done at a decent price? So they should just put the order out there and allow the algos to jump them and drive prices, thus losing performance for their investors? It is no different than the old liquidnet,etc. And if it is a small or micro-crap stock, then the institution will simply call Jones and let them find the other side. In short, Talon knows what he is talking about, and I agree with him. I am no fan of GS, trust me. They DO see the order flow, and while I am no conspiracy theorist, it would be naive to believe they don't use that to their advantage and to profit from. But think more along the lines of "Greenlight Capital has been in here accumulating some of the miners...better grab some of that FCX before they lift it further." The HFT algos piss me off simply because they are constantly jumping in front of orders with stocks that trade 3-4 penny spreads and not letting ME get a better fill by buying on the bid or selling on the offer while they play their little market maker games. But one could argue that ultimately that is better for John Q Public.
So if Big Orders are worked off the bid/offer fine, no problems, then why use Dark Pools? Are you an idiot? English comprehension isn't a strength, obviously. Please show us where near immediate Dark Pool T&S is available. Not delayed/archived. Thanks. HFT IS frontrunning. Probing market (and hidden limit) orders for depth, then buying/selling ahead is front running. Plain and simple. Again, you're fooling yourself. The Big Guys all use HFT and don't want to get caught in "their own" (read: OTHER BIG GUYS) HFT Traps. Are you really that slow, you can't Get that?? As far as everyone having Dark Pool and Algo "access". Okay, granted. If all Pension funds get access to Dark Pools for 500K, that's a start. But I'm sure it's tiered access, right? Or were you bidding right next to JPM for that 1 million share block with your 300K "Timmy Sykes" hedge fund? Just because a trader can access an algo plug-in with their broker, doesn't mean they're C+ programmers with the market skills to implement HFT. Please. That's a total red herring. Anything that requires 400K to 1 Million to implement, isn't "Fair" or "accessible" to most investors/retailers. That's for much larger fish and gives them the advantage. It's basically like an exchange-product that costs 40K a month. You pay 40K, we show market order volume from flash-trades. That's inherently unfair because most retailers/daytraders/independent investors/and many smaller funds, don't have that kind of money to "buy" that service - either from an inside IT contractor(s), or from the exchange. Again, you say the market is rigged. Then you claim it's "fair". Which is it ?
All I've "proven" is that I don't trade equities. And you nit-pick to avoid the point. Why not make Level 2 cost 100K a month? And volume cost another 100K, a month? Just to clarify for you, this is a rhetorical, theoretical question intended to prove a point. Not a commentary about actual market services offered. Just so you don't go quoting me Esignal data packages for the DJIA, thanks
I have no problem with a company like GS buy a ton of stock off a pension fund after hours. That's not the problem and should not be outlawed. The only thing that I ask is that if GS buys millions of Shares off of CALPERS I think that should be disclosed where everybody else can see it. Companies can do what ever they want. All I ask is for transparency and no lies because for free markets everybody should have the same level playing field.
1) Yea, AT WHAT COST? THAT'S THE POINT. Its not "fair" or "accessible", if 99% of the traders/people can't afford it. 2) Yes, flash trading/HFT allows algo's to probe market-order volume, before it goes through! This is called front-running. Why do you suppose GS flashes all those ghosts bid/offers that no one can ever fill?? For shits and giggles? WTF.
I didn't fabricate anything about GS. GS front-running is public information: http://www.youtube.com/watch?v=O4aBf41buNw&feature=related I hope your good buddy is not Sergei Gorbachev. Everybody knows GS admitted front-running (http://www.youtube.com/watch?v=H-MGMaaw1s8&feature=related), but SEC chose to ignore it and refuse to force GS to return the ill-gotten profits. This kind of ignoring behavior is routine in SEC, especially in Madoff case. For over 10 years, despite repeated warnings from the Greek guy, SEC chose to ignore Madoff's ponzi sheme. Are you naive enough to believe that SEC really didn't know what Madoff was doing? The fact is SEC knew it long time ago, but chose to ignore it. ps: In Madoff case, the victims have names and are identifiable. They are putting pressure on SEC and other government agencies to get their money back. But in GS case, the victims of front-running are not easily identifiable. That gives SEC the comfort and excuse to avoid punishing GS and taking the stolen money back and returning it to the victims. SEC is run by crooks.
You're playing semantics here. Dark Pools don't "save money" on execution. They "limit market impact". It's the same thing, man. Lets call a duck, a duck. You just said a Dark Pool execution goes close to market price. Whereas, if they took the same order to market, the issue might slam 2$ (VLO) away from the price. That saves you 1.9X$ for using the dark pool. C'mon. Seriously. I'm not inherently against Dark Pools. The T&S is all I care about it. If two consensual parties want to transact behind closed doors at an agreeable price, fine. But that info should be made public the moment it goes through. Under what case would a delayed TS from a dark pool execution change the market? If the market only trades different to front run the big order, then a dark pool wouldn't have that much effect. But we're talking volume, too. Volume info is huge. In a light market, an opposing dark pool execution could change sentiment and the trend. How could this not happen?
So what's net-cheaper? Pay the big access/liquidity fees and trade via a dark pool? Or get front-run by the retailers/HFT'ers, and trade same size off ARCA? talontrading is saying Dark Pools save market impact...