An alternative trading system ("ATS") that does not publish quotes to the industry gets the unfortunate moniker "dark pool". That label leads some inside the investing public to believe that nefarious activities are taking place, when actually dark liquidity has existed in a lot of forms since the start of trading on organized stock exchanges. Indeed, ATSs that do not publish quotes are only 1 form of "dark" trading that happens currently.
The Securities and Exchange Commission (SEC) is focused on equity marketplace structure, amongst its many responsibilities. With numerous rule proposals, along with a idea release looking for comments on a wide range of market structure topics, the SEC has sought and received input from a lot of market participants from the smallest of retail investors to the largest pension plans along with the tiniest of hedge funds to the grandest of money managers, along with all manner of broker-dealers and other monetary intermediaries. The SEC is now synthesizing these comments and taking into consideration what new regulation, if any, is appropriate.
One of the rule proposals relates to feasible adjustments to the regulation of ATSs that don't publish quotes. ConvergEx Group's comment letter on this rule proposal may be discovered on www.sec.gov. The comment letter discusses a few of the history of dark liquidity, the reasons it exists, along with the purposes it serves. The letter also takes a candid examine the SEC's proposed rules and tries to suggest some modifications that could possibly help accomplish the SEC's goals without having hindering this necessary source of liquidity and best execution.
Hedge funds, both big and little, can utilize dark pools to improve their trading strategies in many key methods. 1st, ATSs provide further liquidity that may not be offered in the published quotes or on exchanges. Most shareholders appreciate the anonymity out there by means of ATS trading, so you'll be able to discover additional liquidity by accessing dark pools. Second, several ATSs offer price improvement over the published quote. If just about every trade you execute is price improved a penny a share, the fund's alpha would show measurable improvement. Third, substantial blocks are more likely to trade smoothly and with much less marketplace impact when traded in an ATS. Fourth, the anonymity afforded by dark pools means a hedge fund can submit orders with small or no marketplace impact.
ATSs with non-public trading interest are just as critical to the efficient functioning of the equity markets as exchanges and public quotes.
So fret of Darth Vader as well as the dark side. But do not steer clear of the liquidity and cost progress of dark pools.
The Securities and Exchange Commission (SEC) is focused on equity marketplace structure, amongst its many responsibilities. With numerous rule proposals, along with a idea release looking for comments on a wide range of market structure topics, the SEC has sought and received input from a lot of market participants from the smallest of retail investors to the largest pension plans along with the tiniest of hedge funds to the grandest of money managers, along with all manner of broker-dealers and other monetary intermediaries. The SEC is now synthesizing these comments and taking into consideration what new regulation, if any, is appropriate.
One of the rule proposals relates to feasible adjustments to the regulation of ATSs that don't publish quotes. ConvergEx Group's comment letter on this rule proposal may be discovered on www.sec.gov. The comment letter discusses a few of the history of dark liquidity, the reasons it exists, along with the purposes it serves. The letter also takes a candid examine the SEC's proposed rules and tries to suggest some modifications that could possibly help accomplish the SEC's goals without having hindering this necessary source of liquidity and best execution.
Hedge funds, both big and little, can utilize dark pools to improve their trading strategies in many key methods. 1st, ATSs provide further liquidity that may not be offered in the published quotes or on exchanges. Most shareholders appreciate the anonymity out there by means of ATS trading, so you'll be able to discover additional liquidity by accessing dark pools. Second, several ATSs offer price improvement over the published quote. If just about every trade you execute is price improved a penny a share, the fund's alpha would show measurable improvement. Third, substantial blocks are more likely to trade smoothly and with much less marketplace impact when traded in an ATS. Fourth, the anonymity afforded by dark pools means a hedge fund can submit orders with small or no marketplace impact.
ATSs with non-public trading interest are just as critical to the efficient functioning of the equity markets as exchanges and public quotes.
So fret of Darth Vader as well as the dark side. But do not steer clear of the liquidity and cost progress of dark pools.
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