What are some indicators that a dark pool operator has effective anti-gaming controls in place? There are some that prohibit IOCs (immediate or cancel) but is that necessary? It seems like that could hurt the investor by limiting order types.

This sort-of user's guide to dark pools vaguely discusses some possible controls. Anyone have more technical knowledge?

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    $\begingroup$ I know some dark pools won't allow HFTs on them; they require that the firm be known for long-term investments. It would also be easy to require every trade to be larger than a fixed size (like 10000 shares), but I don't know of any pool that actually does that. $\endgroup$ – chrisaycock Oct 8 '13 at 2:53
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    $\begingroup$ Dark pools will often "look at the flow" -- order to fill ratios and the like -- to separate HFT players from the rest. They can then allow large institutional investors to refuse trading with HFT in their pool. $\endgroup$ – Brian B Oct 8 '13 at 12:50
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    $\begingroup$ Also, certain dark pools allow you to explicitly blacklist any firm. $\endgroup$ – Yike Lu Oct 15 '13 at 13:52

So to summarize the comments given, dark pools seem to do the following:

  • banning of specific firms by the dark pool
  • requiring a minimum order size
  • banning of firms by the participants
  • flow analysis to separate different types of players

To me it seems that this covers most of the reasonable actions they could possibly take and whether this is done seems to be a good indicator. It is up to you to decide how well the first and last item are implemented. By banning the majority of the firms you can effectively make a whitelist which allows you to only trade with firms you like.


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