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I don't understand how dark pools attract liquidity
- Thread starter WhiteOut56
- Start date
Quote from annaland:
Futures have a 5-15 minute delay for block trades depending on jurisdiction. Equities are shorter, yes.
Oh interesting. Never heard anyone refer to block trade reporting as being a dark pool. Typically a dark pool refers to a crossing network formed under Regulation ATS (in the US of course) which doesn't display its quotes on the tape...
Quote from dinn13:
Oh interesting. Never heard anyone refer to block trade reporting as being a dark pool. Typically a dark pool refers to a crossing network formed under Regulation ATS (in the US of course) which doesn't display its quotes on the tape...
Dark pools originated for trading block transactions...
Quote from annaland:
Dark pools originated for trading block transactions...
yes and dark pools like pipeline still deal exclusively with block trades but people would look at you funny on the street if you referred to block trade reporting of futures on the CME as a dark pool since it's clearly not a dark pool
EDIT: I think you're just getting the jargon wrong, block trade reporting is definitely dark liquidity but not a dark pool. For example a hidden order on nasdaq or a mid point order on bats is dark liquidity but those exchanges are not dark pools and no one refers to the dark liquidity as such
Quote from dinn13:
yes and dark pools like pipeline still deal exclusively with block trades but people would look at you funny on the street if you referred to block trade reporting of futures on the CME as a dark pool since it's clearly not a dark pool
EDIT: I think you're just getting the jargon wrong, block trade reporting is definitely dark liquidity but not a dark pool. For example a hidden order on nasdaq or a mid point order on bats is dark liquidity but those exchanges are not dark pools and no one refers to the dark liquidity as such
I see your point but disagree, regardless of the "funny" way the retail street would look at me. There is a LARGE relationship between dark pools and block trades. Further, block trades executed <i> away from a centralized exchange</i> comply with different regulations.
Quote from annaland:
I see your point but disagree, regardless of the "funny" way the retail street would look at me. There is a LARGE relationship between dark pools and block trades. Further, block trades executed <i> away from a centralized exchange</i> comply with different regulations.
I meant institutional traders by saying the street as retail traders are pretty much excluded from direct access to dark pools (except for some stuff through interactive brokers but even then only for taking liquidity). Block trading and dark pools do have a big relationship in that both are dark liquidity but they are two distinct things. You don't send an order to a block trading facility but rather a pre-arranged trade. Whereas the point of a dark pool is to send an order to find liquidity and not to send a pre-arranged trade.
Forgot to say that the other huge difference between the two is the information leakage inherent in arranging a block trade. With a block trade you have to call/instant message around to different sales traders in order to find someone to take the other side. In doing so at a minimum one other party finds out your intent to trade, and when you do trade your counterparty knows who you are.
With a dark pool there isn't that kind of information leakage (although some send out ioi's but that is usually configurable and the biggest ones don't send them out like sigma x) and you never know who the counterparty is.
With a dark pool there isn't that kind of information leakage (although some send out ioi's but that is usually configurable and the biggest ones don't send them out like sigma x) and you never know who the counterparty is.
Quote from dinn13:
I meant institutional traders by saying the street as retail traders are pretty much excluded from direct access to dark pools (except for some stuff through interactive brokers but even then only for taking liquidity). Block trading and dark pools do have a big relationship in that both are dark liquidity but they are two distinct things. You don't send an order to a block trading facility but rather a pre-arranged trade. Whereas the point of a dark pool is to send an order to find liquidity and not to send a pre-arranged trade.
There is no pre-arranging in POSIT or Liquidnet, both being dark POOLS for large buy-side traders. POSIT is a call auction which matches the buy and sell orders and attempts to mitigate front running by not revealing orders to the market. The issue with POSIT arises from order imbalances not information leakages.
I believe what you are referring to a pre-arranged trade is IOI.
Quote from annaland:
There is no pre-arranging in POSIT or Liquidnet, both being dark POOLS for large buy-side traders. POSIT is a call auction which matches the buy and sell orders and attempts to mitigate front running by not revealing orders to the market. The issue with POSIT arises from order imbalances not information leakages.
I believe what you are referring to a pre-arranged trade is IOI.
Sorry if i wasn't clear or if i'm still misunderstanding you. I was attempting to refute what seemed to be your assertion that the CME block trading facility is a dark pool which it obviously is not. Cause at the CME block trading facility you send pre-arranged trades and due to that process have information leakage which you do not do or have with a dark pool like posit or liquidnet.
And I thought you meant the CME block trading facility cause they are the ones with the 5-15 minute requirement for sending them block trades...
Quote from dinn13:
Sorry if i wasn't clear or if i'm still misunderstanding you. I was attempting to refute what seemed to be your assertion that the CME block trading facility is a dark pool which it obviously is not. Cause at the CME block trading facility you send pre-arranged trades and due to that process have information leakage which you do not do or have with a dark pool like posit or liquidnet.
And I thought you meant the CME block trading facility cause they are the ones with the 5-15 minute requirement for sending them block trades...
Excuse me while I kiss the sky...
My point was that dark pool block trading facilities exist in derivatives markets with reporting lags for hedging purposes. Instinet, Archangel are just a few examples. You disagreed that block trading facilities and dark pools can be the same using equities. Thus, I turned to equities also to show you that dark pool block facilities exist.