Posted on 07/13/2008 10:12:20 PM PDT by TigerLikesRooster
Understanding of Dark Pools is Elusive, Reports Traders Magazine Survey
June 17, 2008
By Nina Mehta
The dark pool landscape is changing so rapidly that a large portion of buyside traders can't keep up with some of the developments.
According to a Traders Magazine electronic survey, 38 percent of buyside traders said they were not aware that some dark pools send out or receive information about resident orders. Nor were they aware that some dark pools send and receive electronic immediate-or-cancel orders from other venues.
Dark pools are now stepping up efforts to cater to different buyside constituencies through their liquidity-seeking efforts. Buyside traders are grappling with what these changes mean for their executions. Forty-two percent of survey respondents said they did not know whether they were sufficiently informed about what some dark pools did with their flow. Another 13 percent admitted they did not know what various pools did with their flow, and 14 percent said they did not want or need to be involved in those decisions.
In comparison, 22 percent said they were sufficiently informed about what dark pools do with their resting orders. And 9 percent said they actively controlled what happened with their order information in dark pools.
Overall, the buyside isn't opposed to alternative trading systems sending out indications to find contra-side orders. But the range of responses from the buyside community highlights the differing priorities of institutions as well as their uncertain knowledge about how dark pools connect to one another.
(Excerpt) Read more at tradersmagazine.com ...
Ping!
Now let me get this straight...
That’s illuminating!
i can has chezeebugr nao?
Uh, yeah. What he said.
What the heck is a “dark pool” and why should I care?
Thank you for the helpful info.
I get the concept, but the details just make me think of a bunny and a pancake...
I can see how it would distort the market. But one thing immediately is clear from the article is that even the participants don’t know what is swimming around in the pools and in some cases don’t care to know so long as “liquidity” is available.
“Dark pools?”
Racism!
A stock can only handle so much volume per minute. If you try to buy or sell too much more than what's typical for that stock, it will cause the price to swing up or down rapidly on a temporary basis because of a lack of liquidity. The "Dark pool" idea is that if you have a bunch of people with larger that average volume to trade they can check with each other first to see if someone can absorb a large quantity. If you're a seller you want a buyer, and vice versa. The dark pool brings them together without hurting the smaller players.
Back in the day, the same thing was done by what was called the "block desks" of the big investment banks. This is just an automated version of them.
Thanks for the ping.
Most of us are getting tired of bailing out reckless multimillionaires.
Who knows who the traders are? That’s why they’re called “dark”.
Indeed you may be tired of bailing out reckless multimillionaires but remember that money looks after money. The actors change, but the play goes on.
Savings and Loan, Fannie and Freddie, it goes on and on, and there’s no evidence that I can see that it will not increase as the precedent has been set.
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