Dark Pool - How it works, Pros & Cons - YouTube

how much do you know about dark pools let's  take a deep dive hey thanks for tuning in  

holy shields here for kalkine media dark pools are  private networks or private platforms that allow  

professional investors to trade stock on a large  scale basis without revealing too many details  

because of this a dark pool is often regarded  as a dark pool liquidity or dark liquidity dark  

pools are precisely opposite to public financial  markets as they are private platforms without any  

attention from the media dark pools keep the  data about stocks private until the trade is  

executed this is a favorable medium for investors  like hedge funds and activist investors during  

situations when they do not want to reveal their  strategy and the position they are taking when the  

securities and exchange commission or scc allowed  brokers to trade big blocks of shares in the 1980s  

dog pools arose electronic trading and a  2007 sec regulation aimed at increasing  

competition and lowering transaction costs have  sparked an increase in the number of dark pools  

because dark pools are generally hosted within  a huge corporation they can demand cheaper fees  

than exchanges let's have a look at the types of  darkfalls first of all you've got broker-dealer  

and darkpools which are the darkpools developed by  broker-dealers for their clients and some of their  

proprietary traders some of the popular broker  dealer owned dark pools include cross finder  

by credit susie sigma x by goldman sachs ms paul  by morgan stanley and city match by citibank the  

unique feature of broker-dealer owned dark pools  is that they derive their prices from the trade  

flow as a result they offer the feature of price  discovery to their clients then you've also got  

the agency broker or the exchange owned dark pool  the agency broker or exchange owned dark pools act  

as agencies rather than the principal some of the  famous agency brokers or exchange owned dark pools  

include instant liquidnet and igt posit there is a  price discovery for clients available in this type  

of dark pool however the prices are still derived  from the flow of trades for instance the midpoint  

of national best bid and offer and lastly you've  got electronic market makers dark pool independent  

operators like get co and knight mainly develop  electronic market makers like dark pools  

this type of dark pool operates as an independent  platform with its own set of rules and guidelines  

so how about the advantages of a dark pool firstly  private trading facilities the privacy policy of  

dog pools enables the investors to keep their  strategies secret that won't come out to the  

outer world especially to its competitors for  example in the public market prices might cause  

an impact on people whereas in a dark pool it can  easily be prevented due to its privacy policies  

secondly avoiding price devaluation dark  pools enable their investors to break down  

a huge stock into a smaller portion and sell  this portion before the prices get devalued  

plus increased market efficiency and liquidity the  high frequency trade and other algorithmic trade  

happening in the dark pools have proven to  increase market efficiency and liquidity thus  

unlike the public market where liquidity can dry  up very quickly in the dark pool hft method has  

shown to increase both the market efficiency and  liquidity now there are also unfair advantages  

that's right dark pools are viewed as a  medium where some investors receive an unfair  

leg up especially in high frequency trade many  investors gain an unfair advantage that others  

do not get unfair and unethical trade practices  on the dark pool are also kept hidden as for the  

limitations of dark pools well it comes down to  mainly a lack of transparency as dark pools are  

private platforms for stock sales the details  of the stocks are kept confidential until the  

execution of the sale happens dark pools operate  they're trading with very little or negligible  

insights as compared to public markets it's  often viewed as a limitation of the dark pool  

by the investors who buy those stocks now that  you're up to speed check out some of our other  

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