Dark Pool Trading

NotesPaper exam

What is it?

The word 'trading' refers to an alternative way of trading in shares

The word 'pool' refers to LARGE BLOCKS of shares

The word 'dark' refers to the fact that the share purchase isn't made public until after the transaction (thus not influencing the share price before)

Why do this?

Well nowadays there lots of small purchases of shares as individuals can buy and sell easily online

Therefore a LARGE BLOCK purchase coming up would influence the share price and possibly against the buyer

Therefore they would rather keep the purchase quiet until after the transaction

Any problems with this?

Well it needs an alternative exchange - thus making the regulated exchanges less efficient (the share price is not showing the up-coming transaction)

They also reduce the fairness of a regulated exchange - thus many regulators are now asking for dark pools to report their volumes of transactions weekly

NotesPaper exam