What Is Dark Pool Trading?

By Briana Christina
September 22, 2022

Dark pools have become very common in the investing industry and exist all over the world. Yet, many investors are still confused about dark pool trades.

What Are Dark Pools?

So, you may be wondering what dark pools are? Dark pools have been around since 1979 and are privately organized exchanges designed for trading large securities. Dark pools are unique because they allow certain investors to trade without any public exposure until after the trade has been executed and reported.

The alternative trading system has a powerful role in today’s equity marketplace that can lead to several financial advantages.

How Does Dark Pool Trading Work?

The concept of dark pool trades is straightforward and efficient.

Big institutional investors can place greater trades and orders without exposing their information to the public, in turn providing increased anonymity and liquidity.  

This investing system also charges lower fees than traditional exchanges and is done between the buyer and seller.  

Are Dark Pool Trades Legal?

Although the concept is disconcerting for some investors, dark pool trading is legal and ethically regulated by the Securities and Exchange Commission (SEC).

But as with most good things, the alternative trading system has been misused in the past. For instance, in 2016 both Barclays Capital Inc. and Credit Suisse Securities violated federal laws while operating dark pools. The well-known firms were hit with steep fines and agreed to settle all charges by paying more than $150 million in penalties collectively to the SEC and the New York Attorney General (NYAG).  

Pros of Dark Pool Trading

  • Lower fees & more cost savings over time
  • Complete privacy while trading
  • Avoid price & market movements
  • Access to huge liquidity  
  • Increases overall market efficiency

Cons of Dark Pool Trading

  • Possible abuse & unfair practices
  • Lack of transparency

Does Intrinio Offer Dark Pool Data?

Intrinio does not offer dark pool data at the moment but it’s in the works, so make sure to sign up to our newsletter to stay up to date with product launches, upcoming webinars, and more.

And if you’re looking for a range of reliable financial data products, reach out today to find out how Intrinio’s data and API can help power your platform.

Sorry, we no longer support Internet Explorer as a web browser.

Please download one of these alternatives and return for the full Intrinio Experience.

Google Chrome web browser icon
Mozilla Firefox web browser icon
Safari web browser icon
Microsoft Edge web browser icon
Microsoft Edge