Ratigan nails how "dark pools" rip off traders: Dark pool trading = 10% of volume
- Thread starter ByLoSellHi
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1. Dark pools are used for large customer orders. I sat on an institutional trading desk for a while and I know that we got better executions in the dark pools than we did in the open markets. It is only a question of whether there is someone in the dark pool wanting to take the other side of the trade. We were the CUSTOMER, the PUBLIC... dark pools are not some scheme designed to take money from the customer.
And achilles... who probes the market with a "large order" like you suggest?? Don't you probe with a small order? Like between the bid / offer to see if there's selling interest there?
Retail investors can access this liquidity and this information... it's not something special that no one can access. Again, I know this is true from experience.
gee... here's another thought: it's also possible for people to hide some of their order. For instance, you could enter an order to buy 100K of something on Nasdaq but only show buying 500. Maybe everyone should have to display full size on every order? Well if that was the rule wouldn't you just break the 100K up into 500 share lots yourself? In that case... we need a new rule saying that you have to enter the whole amount you want to buy / sell all at once. Then maybe I'll just wait until tomorrow to do some of it? Ok... then we need a new rule saying a trader can only enter an order once a week.
Do you see where this kind of idiotic intervention goes? You have people who don't understand the mechanics of markets (the vast majority of ET readers also fall here btw) trying to make rules. This cannot end well. Markets are not and never have been fair. That's an illusion. Realize if you want to participate you are playing against a stacked deck and deal with it.
FYI, I pop on ET once every few years and usually get irritated and go away within a few weeks. Just so you know what happens when I vanish!
And achilles... who probes the market with a "large order" like you suggest?? Don't you probe with a small order? Like between the bid / offer to see if there's selling interest there?
Retail investors can access this liquidity and this information... it's not something special that no one can access. Again, I know this is true from experience.
gee... here's another thought: it's also possible for people to hide some of their order. For instance, you could enter an order to buy 100K of something on Nasdaq but only show buying 500. Maybe everyone should have to display full size on every order? Well if that was the rule wouldn't you just break the 100K up into 500 share lots yourself? In that case... we need a new rule saying that you have to enter the whole amount you want to buy / sell all at once. Then maybe I'll just wait until tomorrow to do some of it? Ok... then we need a new rule saying a trader can only enter an order once a week.
Do you see where this kind of idiotic intervention goes? You have people who don't understand the mechanics of markets (the vast majority of ET readers also fall here btw) trying to make rules. This cannot end well. Markets are not and never have been fair. That's an illusion. Realize if you want to participate you are playing against a stacked deck and deal with it.
FYI, I pop on ET once every few years and usually get irritated and go away within a few weeks. Just so you know what happens when I vanish!
I dont understand the question. Nothing happens to the small trader. What if the big block traded NYSE or ISLD instead of in a dark pool like Sigma? What's your point?
Remember dark pool trades happen at NBBO. I executed millions of shares on dark pools and this was always the case. Always. And the volume and trade is also reported on the consolidated tape so everyone sees it... it's just non displayed liquidity. No big deal... and ultimately good for the customer.
Remember dark pool trades happen at NBBO. I executed millions of shares on dark pools and this was always the case. Always. And the volume and trade is also reported on the consolidated tape so everyone sees it... it's just non displayed liquidity. No big deal... and ultimately good for the customer.
It's survival of the smartest. Employ robotic trading to combat institutional advantages.
yes. sometimes they are reported a few seconds or minutes late (there's a regulatory restriction on how late they can be reported). this makes them look like they are outside NBBO but they are really just late to report prints. It is annoying, especially since this happens more when volume is heavy (especially on open, close and at heavy volume turning point), but the trades do hit the tape and are reported for everyone to see.
Than I am at a loss what is so bad about them? If the max delay is in seconds and tops minutes?
I trade KOSPI futures and can constantly see large blocks on tape that do not hit bids/asks directly. It does not affect my trading one bit, I would prefer them hitting DOM since this would make the product more volatile, but for stocks this could really distort the price, at least on short term.
The interesting thing, is that until your posts I was totally in agreement with abolishing them. Little xplaining does wonders.
Thanks,
redduke
I trade KOSPI futures and can constantly see large blocks on tape that do not hit bids/asks directly. It does not affect my trading one bit, I would prefer them hitting DOM since this would make the product more volatile, but for stocks this could really distort the price, at least on short term.
The interesting thing, is that until your posts I was totally in agreement with abolishing them. Little xplaining does wonders.
Thanks,
redduke
Talontrading, I am trying to understand dark pool.
Ok, how much % of shares of the total shares of one company, can someone in the dark pool sell or buy?
Ok, how much % of shares of the total shares of one company, can someone in the dark pool sell or buy?
Happy to have helped. It is such an emotionally charged issue... and politicians don't have good understanding of the issues... and lobbying in Washington is honestly an issue. Even flash trading was an advantage for the customer in my experience... if I see 1000 on the bid at 50.50 and i have 10K to sell... why can't i flash it at .501 and see if someone will buy it there? If so, I'm done on the order. If i have to hit the bid maybe I'm doing 1000 at 50 and the rest all the way down to 40, right?
One of the dumbest explanations of HFT / flash trading was a white paper that explained in the above scenario a high frequency trader could have bought my 10K at .501 and unloaded them to the regular bid at .50. Huh? Wait... so I sell at .501 which means he BUYS at .501 and then he unloads which means he SELLS them at .50??? That's a business plan?
Be careful in all of these discussions and make sure you really understand the mechanics. I came from a futures background and had to make adjustments each time I went into a new market.
One of the dumbest explanations of HFT / flash trading was a white paper that explained in the above scenario a high frequency trader could have bought my 10K at .501 and unloaded them to the regular bid at .50. Huh? Wait... so I sell at .501 which means he BUYS at .501 and then he unloads which means he SELLS them at .50??? That's a business plan?
Be careful in all of these discussions and make sure you really understand the mechanics. I came from a futures background and had to make adjustments each time I went into a new market.
Quote from RedDuke:
Than I am at a loss what is so bad about them? If the max delay is in seconds and tops minutes?
I trade KOSPI futures and can constantly see large blocks on tape that do not hit bids/asks directly. It does not affect my trading one bit, I would prefer them hitting DOM since this would make the product more volatile, but for stocks this could really distort the price, at least on short term.
The interesting thing, is that until your posts I was totally in agreement with abolishing them. Little xplaining does winders.
Thanks,
redduke
I don't exactly understand the question... how much % of shares of the total shares of one company could you buy on the NYSE? It's the same question. All a dark pool is is an electronic market without displayed liquidity... there are bids and offers at each level but you can't see them and can't see the size. The dark pool can cross internally or with the NBBO. If I have a large offer in the dark pool and NYSE bid comes to that level then my order will trade out to NYSE. If another buyer comes into the dark pool then my order might cross there.
I don't understand exactly what youre asking... can you help me understand the question better?
I don't understand exactly what youre asking... can you help me understand the question better?