August 11, 2013

Dark pools

Dark pools: The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is represented by block trades facilitated away from the central exchanges.

In finance, dark pools of liquidity (also referred to as dark liquidity or simply dark pools or black pools) is trading volume or liquidity that is not openly available to the public. The bulk of these represent large trades by financial institutions that are offered away from public exchanges so that trades are anonymous. The fragmentation of financial trading venues and electronic trading has allowed dark pools to be created, and they are normally accessed through crossing networks or directly between market participants.
One of the main advantages for institutional investors in using dark pools is for buying or selling large blocks of securities without showing their hand to others and thus avoiding market impact as neither the size of the trade nor the identity are revealed until the trade is filled. However, it also means that some market participants are disadvantaged as they cannot see the trades before they are executed; prices are agreed upon by participants in the dark pools, so the market becomes no longer transparent.

My take: nothing is transparent here. If some trades go wrong or one party defaults, no one outside the pool will come to know of it.


  1. Retailers are taken for granted by sebi

    1. 1.This has nothing to do with SEBI and
      2.Dark pools are not available in India


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