Dark Pool

Dark pools of liquidity (also dark liquidity) are crossing networks that provide liquidity that is not displayed on order books. This is useful for traders who wish to move large numbers of shares without revealing themselves to the open market. Dark liquidity pools offer institutional investors many of the efficiencies associated with trading on the exchanges' public limit order books but without showing their hands to others. Dark liquidity pools avoid this risk because neither the price nor the identity of the trading company is displayed. There are now three main types of dark pool. First are independent companies set up to offer a unique differentiated basis for trading. Second are broker owned dark pools where clients of the broker interact, most commonly with other clients of the broker (possibly including its own proprietary traders) in conditions of anonymity. Finally some public exchanges are creating their own dark pools to allow their clients the benefits of anonymity and non-display of orders while offering an exchange ‘infrastructure’. Depending on the precise way in which a ‘dark’ pool operates and interacts with other venues it may be considered and by some vendors is referred to as a ‘grey’ pool.