Contrary to what its name may imply, a dark pool is not a sinister invention of criminal investors. Dark pools are obscure, legal, private trading exchanges that can have a significant impact on the market. The Journal of Corporation Law (JCL), along with the Graduate & Professional Student Government, the Iowa Student Bar Association, and the Tippie College of Business, is hosting its biennial symposium this week, March 30-31 entitled “What Happens in the Dark: An Exploration of Dark Pools and High Frequency Trading.”
Like the New York Stock Exchange and other public exchanges, a dark pool is a market that traders can utilize to buy and sell stocks. The difference is that a dark pool is privately-owned. Dark pools are used in high-volume trades. On a public exchange like the NYSE, traders must disclose their intention to trade before they do so. As potential investors anticipate the sale, the expected price of the stock can fluctuate, and, in large enough orders, impact the market. On the other hand, in a dark pool, traders do not have to disclose their intention to sell, which keeps the stock price intact to ideally bring a better deal to the trader. Dark pools also permit participants to trade anonymously.
While the opaqueness of dark pools can help traders, it can hinder buyers. Because of the lack of transparency, buyers may not be getting the best possible price for their trade. Dark pools are also prone to predatory trading by high-frequency traders. Given the current regulatory environment and the fact that many are still feeling the effects of the 2008 recession, the regulation of dark pools is expected to increase in the upcoming years. The goal of the symposium is to examine these dark pools and bring them into the light.
Katelynn McCollough, Senior Associate Editor on JCL and one of the organizers of the symposium, encourages everyone to attend at least part of the symposium: “between the 2008 crash and moves like ‘The Big Short’ gaining popularity, people realize that this topic has a big impact on their lives.” McCollough also encourages people who have any questions regarding dark pools to attend. “each speaker has 20-30 minutes to present on their article topic with the other speakers set up as a panel, who have a first-go at that topic after the presentation, and then questions open up to the audience.”
For a full list of speakers and a schedule, visit the Symposium’s website.
Amanda Marincic -- March 28, 2017