Immediate Trade

Dark Pools vs Lit Trading

Cover Image for Dark Pools vs Lit Trading
Greg P
Greg P
Posted underAlternative Trading SystemsBlock TradeBlock TradingDark PoolsEconomics ExplainedEducationExchangeHFTHigh Frequency TradingLit Markets

Dark pools, around since the 90s, are legal and regulated, but trades are kept hidden until after execution. They have grown in popularity, capturing 40% of US market share in 2021, and are used by hedge funds, pension funds, mutual funds, and brokers. Dark pools offer anonymity and potential additional liquidity, but lack of transparency can lead to longer completion times and potential market manipulation. Critics argue that dark pools give institutional investors an unfair advantage, contribute less to price discovery, and can be exploited by traders. Regulators have taken steps to increase transparency, but concerns remain. 

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