Dark Pools of Liquidity

Submitted by Share Trading on 9 November, 2010 - 17:42

Dark pools of liquidity (also dark pools or dark liquidity) are financial buying and selling venues or crossing networks similar to exchanges but that provide liquidity that is not displayed on order books. This is useful for financial traders who wish to transfer large numbers of shares with out revealing themselves to the open industry.

Dark liquidity pools offer institutional investors and traders most of the efficiencies related to trading about the exchanges' public limit order books but without having exhibiting their actions to others. Dark liquidity pools steer clear of this risk due to the fact neither the price nor the identity of the trading organisation is displayed.

Dark pools are recorded to the national consolidated tape. Even so, they're recorded as over-the-counter transactions. As a result detailed information about the volumes and kinds of transactions is left towards the crossing network to report to clients if they desire and therefore are contractually required.

Dark pools enable funds to set up and move significant blocks of equities without the need of tipping their hands in regards to what they're as much as. Modern trading platforms and the lack of human interaction have reduced time scale on marketplace movements. This increased responsiveness of the price of an equity to market pressures makes it more difficult to exchange significant blocks of shares without affecting the cost.

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