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Matt's Market Insights


Dipping Our Toes Into Dark Pools


Dark pools sound ominous, like dark energy or the dark side. But are they? Let's take a look at how dark pools operate and what the advantages and disadvantages are of having them part of the financial landscape.


Dark pools (sometimes referred to as the "upstairs market") are private trading venues where limited-transparency trading can take place. These are networks which allow large traders to execute orders "behind the scenes," so as to maintain pre-trade transparency and avoid issues that arise when large orders are placed through standard exchanges.


The cards are generally stacked against small retail investors, but large institutional traders do encounter some obstacles when looking to execute trades. When you or I place an order, the small volume of our trade is easily swept into the market's liquidity with only a minor, if any, impact on the price of the security. However, this is not ... Log in or subscribe to continue reading.

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