Non-displayed Pools of Liquidity: Shining a light into the darkness

Myth #1: Dark pools live up to their negative connotations.  To some, the term “dark pools” sounds ominous, conjuring up images of great swathes of institutional liquidity moving around the market more or less out of regulators’ sight (if not out of mind). That such pools are not open to all market participants only reinforces this stereotype.  And regardless of efforts to address dark pools’ image problem (one equities crossing network has instructed all employees to avoid using the term dark liquidity altogether, preferring instead the more banal “non-displayed liquidity”), some continue to question their value and implicit fairness. This is, of course, ridiculous. Regardless of what they are called, dark pools address key inefficiencies in certain markets, notably equities. The problems associated with trading size in the global equities markets have been well-documented. Market fragmentation, miniscule average trade sizes, slippage and information...continued