Dark liquidity pools

Dark Liquidity Pool

A private securities exchange or trading platform. Dark liquidity pools do not publish the prices of their transactions, which allows investors to make larger transactions at lower cost than they might otherwise. Most traders in dark liquidity pools are institutional investors, such as mutual funds or hedge funds, that wish to protect the anonymity of their investments and/or investors. They also may not wish to cause price movements by the disclosure of their transactions. No dark liquidity pool is completely secretive: they must register with the SEC as either a securities exchange or a broker-dealer; they are governed by Regulation ATS, which stipulates certain transactions and prices that they must disclose under various circumstances. See also: Transparency.

Dark liquidity pools.

Dark liquidity pools are private alternative trading systems or platforms. Prices aren't published, and participants can make anonymous trades faster and at a lower cost than they can on a public exchange.

Most dark-pool transactions are between institutional investors, including mutual funds and hedge funds, which trade in large volumes. Their interest in anonymity is either because they want to protect the privacy of their investment choices or because they fear a major transaction could move the markets by triggering copycat trading.

Dark liquidity pools must register with the Securities and Exchange Commission (SEC) as either national securities exchanges or broker-dealers. The broker-dealers must follow the rules laid out in SEC Regulation ATS, which governs fair access and a requirement to publish prices for trades in certain securities under specific circumstances.

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Dark liquidity pools do not display quotes, but match orders anonymously instead to minimise the market impact of large trades.