Dark pools are watering holes for traders that have insider knowledge. This is reflected in the high rebates that liquidity providers receive.
You are using an out of date browser. It may not display this or other websites correctly.
You should upgrade or use an alternative browser.
You should upgrade or use an alternative browser.
I don't understand how dark pools attract liquidity
- Thread starter WhiteOut56
- Start date
Well you can have two funds. Dunce Fund A and Smart Dunce Fund B... Dunce A gets in there and transacts at absurd prices and gets filled (all the prices are bad fills for him and / or his clients) Smart Dunce Fund B comes out ahead collecting profits. Ask yourself why Dunce Fund A would let that happen? - He's either stupid or hes in on it with Smart Dunce Fund B....
With lots of liquidity and maybe a proprietary algorithm that helps to mirror Dunce Fund A's trades.. Smart Dunce Fund B can come out clean as a whistle.
With lots of liquidity and maybe a proprietary algorithm that helps to mirror Dunce Fund A's trades.. Smart Dunce Fund B can come out clean as a whistle.
Quote from FerdinandAlx:
BATS Europe does. I thought Turquoise and Chi-X had a maker-taker rebate scheme too but I checked and they charge a %based fee to both sides.
Actually the BATS Europe dark pool charges .15 bps to either take or add liquidity.
http://www.batstrading.co.uk/market_data/dark_pool/
Quote from WhiteOut56:
If you provide on a dark pool Chances are they charge u something like .25/100. How do dark pools even attract anyone who is interested?
How can anyone be profitable w those margins
You have different benefits with dark pools. First, there is a minimum threshold for size; set buy an amount of volume that would move the price. The threshold is set in order to not allow a dealer or another trader to front run (or step ahead of the order and ride the price change ahead of the large order). Second, there's typically a 15 minute post-trade transparency delay (which allows dealers to hedge their positions without disclosing their trading strategies).
Quote from dinn13:
Don't know what it's like for retail but for institutional traders most dark pools don't charge anywhere near 25 mills. There are a few that do and charge more but they tend to be for exclusively trading large size
Knight and Getco are known for not charging anything for crossing the spread to take liquidity.
Credit Suisse Crossfinder and Goldman Sachs Sigma X cost far less than 25 mills but it is negotiated per firm based on volume.
So for liquidity takers it is a lot cheaper to remove liquidity than on Nasdaq/Bats/Arca/Nyse/Edgx and one doesn't affect the NBBO directly so a lot less likely to move the price.
For liquidity providers one can post size while not showing your hand to the market. Also since the quote is not part of the NBBO, when the market is swept one won't necessarily get filled which can be a good thing since it tends to be hft players who find the pricing advantageous to them. So fills are more likely to be from natural buyers/sellers although hft players are quite involved with dark pools and will often sweep the dark pools prior to sweeping the NBBO exchanges in order to source liquidity prior to a market move. Can be mitigated to a degree by having a minimum fill size set on the order (something that not all exchanges allow so another benefit for many dark pools).
Dinn, You seem quite knowledgable on dark pools. I have never been swept on crossfire before a market move. From your experience does this happen often? Also do dark pool transactions post on time sales in real time, from my experience they do not since I never see my dark pool transaction on t/s.
Quote from jd7419:
Dinn, You seem quite knowledgable on dark pools. I have never been swept on crossfire before a market move. From your experience does this happen often? Also do dark pool transactions post on time sales in real time, from my experience they do not since I never see my dark pool transaction on t/s.
Every dark pool posts to the time in sales and you'll see them on the TRF/ADF feeds, so for example in reuters under IBM.DF, wombat IBM.D, and bloomberg IBM UD
I know Goldman's Sigma X and Credit Suisses CrossFinder post in realtime as I always see my execs in realtime.
But for example sometimes I'm trying to liquidate a decent size position so I'll be posted at several mid points on the exchanges and a few dark pools and they'll all get executed at the same time a few milliseconds prior to the price moving from people sweeping, and this tends to be the case in higher liquidity stocks where there are more HFT players. Tends not to happen as often in the lower liquidity names.
But that is just anecdotal. I haven't quantified the impact or degree to which it happens cause it's not that often that I post in the dark pools, just when I need to liquidate a large position.
But here is a paper from ITG about it called "Understanding and Avoiding Adverse Selection in Dark Pools"
www.itg.com/news_events/papers/Adve..._HzqUmLtKBo1K4bkw&sig2=7dcJR69bHnPMpZg1fxBCVQ
Quote from annaland:
You have different benefits with dark pools. First, there is a minimum threshold for size; set buy an amount of volume that would move the price. The threshold is set in order to not allow a dealer or another trader to front run (or step ahead of the order and ride the price change ahead of the large order). Second, there's typically a 15 minute post-trade transparency delay (which allows dealers to hedge their positions without disclosing their trading strategies).
Which dark pool has a 15 minute post-trade transparency delay? I believe that's breaking the rules since all dark pools have to report their executions to the tape within 90 seconds. And should add the ones I trade on report in near real time if not real time.
"Currently, all dark pools must report their trades within 90 seconds to the TRF operated by either NYSE Euronext or by Nasdaq or to FINRA's ADF."
from
http://www.advancedtrading.com/crossingnetworks/showArticle.jhtml?articleID=223101042