Axel Pierron
Axel Pierron

FX dips toes in Dark Pools

Axel Pierron looks at how trading in dark pools, traditionally dominant in equities trading is also making its way to FX.

First Published: e-Forex Magazine 27 / Features / April, 2007

Dark liquidity pools are flooding US equities trading and are quickly spreading to Europe. Now trading in dark pools, traditionally dominant in equities trading is also making its way to the FX market.Trading in dark pools allows investors to remain anonymous and keep their trading activity private. They are called dark pools because market participants can not see the order book and therefore do not know the bid/ask or the depth of liquidity. These pools allow traders to execute big ticket trades without sounding an alarm to the market. This privacy is highly valued by investors such as hedge funds and presents an attractive alternative to trading on an exchange. It also allows more anonymity than trading on an ECN since with an ECN Central Limit Order bids and offers are displayed.Trading in dark pools is flourishing in the US equities market due to regulatory changes and the anonymity and lower costs associated with trading in these pools. The two major factors that can explain the development of dark pool...continued

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