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What are dark pools and what benefits do they offer to investing public? Explain.

What are dark pools and what benefits do they offer to investing public? Explain.

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Answer #1

Dark Pools are:

  • Private stock exchanges
  • Not accessible to common public
  • Accessible to limited number of institutional investors to carry out large volume of trades so that their trading don't impact the prices adversely
  • there to mask the identity of the institutional investors carrying large trades

Dark pools lack transparency

Benefits:

  • Adverse impact of large trades are eliminated
  • Common public don't bear the brunt of price fluctuation due to large volume of trades in a particular scrip
  • Brings liquidity to the institutional investors
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