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To: TigerLikesRooster

I can see how it would distort the market. But one thing immediately is clear from the article is that even the participants don’t know what is swimming around in the pools and in some cases don’t care to know so long as “liquidity” is available.


12 posted on 07/13/2008 10:53:20 PM PDT by count-your-change (you don't have to be brilliant, not being stupid is enough.)
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To: count-your-change; All
Actually it keeps larger orders from "distorting the market".

A stock can only handle so much volume per minute. If you try to buy or sell too much more than what's typical for that stock, it will cause the price to swing up or down rapidly on a temporary basis because of a lack of liquidity. The "Dark pool" idea is that if you have a bunch of people with larger that average volume to trade they can check with each other first to see if someone can absorb a large quantity. If you're a seller you want a buyer, and vice versa. The dark pool brings them together without hurting the smaller players.

Back in the day, the same thing was done by what was called the "block desks" of the big investment banks. This is just an automated version of them.

14 posted on 07/14/2008 2:45:59 AM PDT by tcostell (MOLON LABE - http://freenj.blogspot.com - RadioFree NJ)
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