It’s difficult to share / link stories having Bloomberg’s subscription app installed. But it’s sometimes possible to link reprints at Yahoo as I’ve done here.
“For the first time on record, the majority of all trading in US stocks is now consistently occurring outside the country’s exchanges, according to data compiled by Bloomberg. This off-exchange activity — which happens internally at major firms or in alternative platforms known as dark pools — is on course to account for a record 51.8% of traded volume in January. Barring an unexpected dip, it will be the fifth monthly record in a row, and the third month running that hidden trades make up more than half of all volume.”Read at Yahoo Finance (Originally from Bloomberg)
https://emailshare.cmail20.com/t/n/d-l-c03970e3e18911efa3a97fc765cc8b44-l-d-r-l/
Comments
(this is NOT saying some part of the financial industry will not exploit dark pools, that is to be fully expected given the american worship of capitalism. it even seems unpatriotic these days not to participate in outright grift.)
In addition, your broker may fill your order from its inventory if it can provide the same or better price than the exchange. Your brokerage confirmation will flag this. The broker saves some fees by doing this.
https://en.wikipedia.org/wiki/Alternative_trading_system
Actually I was asking whether the hidden trading might sometimes serve to intentionally hide certain trades from public view - for any reason? Or is it as @Yogi suggested merely a way to reduce costs and make markets operate more efficiently? If it’s simply done for efficiency and to keep costs down it shouldn’t matter whether 50%, 75% or 90% of all trades are hidden. As the linked article states, the trend is upward.
I only focus on price discovery and bid-ask spreads. With machines trading against us, these two items are unlikely to stay skewed for too long. YBB can tell us whether all (ATS or exchange) trades have to be reflected in the real time quotes we see at the brokerage.
For us retail folks trading in securities with low bid-ask spreads with decent volumes and during regular trading hours, I do not see any real impact.
Exchange bid-ask and volumes are from exchanges only. Looking at Barron's Trading Diary data, only those from NYSE, NYSE American, Nasdaq, NYSE Arca are reported, so regional exchanges and OTC data are skipped by the media.
Most retail investors see superficial bid-ask spreads that may apply to the lots of few 100 shares. Professionals rely on Level 2 quotes that show the order book depth.
ATS trades are reported to FINRA and it publishes aggregate data, some weekly, biweekly, monthly or quarterly. So, there is monitoring of ATS activity, but at a different level that that for the exchanges.
https://www.finra.org/filing-reporting/otc-transparency#overview
there are many explanations, but i take the word of a reformed wall streeter, based on a long career witnessing every shenanigan, that hiding price discovery from the public is absolutely a factor. as good a reason as any to quit trading in single stock equity.
https://www.newconstructs.com/dark-pools-have-taken-over-the-market/
From FINRA link, https://www.finra.org/investors/insights/can-you-swim-dark-pool
".....The pools are called “dark” because they don’t broadcast pre-trade data—i.e., the presence, price and size of buy and sell orders—the way that traditional exchanges do. As a result, dark pools don’t contribute to the public “price discovery” process until after trades are executed. They do, however, need to report information about trades that occur.....At the same time, because dark pools necessarily rely on public prices as a benchmark for their trades, and generally under the U.S. Securities and Exchange Commission’s (SEC’s) Order Protection Rule must execute trades at prices at least as good as the best publicly available, dark pools benefit from the pre-trade pricing information provided by those exchanges.....All trade data for listed stock transactions occurring on ATSs, including dark pools, must be submitted to a FINRA Trade Reporting Facility (TRF) and is published on the consolidated tape, an electronic system that provides real-time trade data for listed securities....."
Interesting. Thank @yogibearbull. Would seem to at least mitigate any potential harms to those participating in the more transparent transaction process.