Dark Pool

Search Dictionary

Definition of 'Dark Pool'

A dark pool is a private marketplace for trading securities that is not accessible to the general public. Dark pools are typically used by large institutional investors to trade large blocks of securities without affecting the market price.

There are a number of reasons why investors might choose to trade in dark pools. First, dark pools can provide greater anonymity than public exchanges. This can be important for investors who want to avoid the potential for their trades to be front-run or otherwise manipulated. Second, dark pools can offer lower trading costs than public exchanges. This is because dark pools typically do not have the same level of regulatory oversight as public exchanges. Third, dark pools can offer greater flexibility in terms of the types of orders that can be placed. For example, dark pools may allow investors to place orders that are contingent on the price of another security, or that are executed only after a certain period of time.

The use of dark pools has been controversial. Some critics argue that dark pools allow large institutional investors to trade in a way that is not transparent to the rest of the market. This can give these investors an unfair advantage over smaller investors. Others argue that dark pools provide a valuable service by allowing investors to trade large blocks of securities without affecting the market price.

The SEC has taken some steps to regulate dark pools. In 2014, the SEC adopted new rules that require dark pools to disclose more information about their operations. The SEC also has the authority to investigate dark pools for potential market manipulation.

Despite the SEC's efforts, there is still some concern about the use of dark pools. However, dark pools are likely to continue to play an important role in the trading of securities.

Do you have a trading or investing definition for our dictionary? Click the Create Definition link to add your own definition. You will earn 150 bonus reputation points for each definition that is accepted.

Is this definition wrong? Let us know by posting to the forum and we will correct it.