Dark Pools may sound ominous, but they are actually a very lucrative and important aspect of the capital markets ecosystem. A “Dark Pool” is a private place where investors can trade and exchange securities, derivatives, and other financial instruments.
Typically, large institutions trade “off” the traditional exchanges in Dark Pools as a way to keep the transaction private, or avoid inflicting significant volatility in the markets when they are making big trades. It’s harder to “move the market” when the trades are hidden, and these firms can save big time on transaction fees by trading through a Dark Pool.
Three types of Dark Pools exist: Independent, Broker-Dealer Owned, and Exchange-Owned. Independent pools can be run by any individual company that registers with the SEC. Broker-Dealers can also operatd pools to buy and sell stocks for their clients. Nasdaq, Nyse and BATS also all operate their own dark pools.
In this blog, we are going to give you an overview of Dark Pool Data, explain why you would want to analyze it, and help you find out the best places to access it.
Over the past several years, Dark Pools have grown in popularity. In fact, in February of 2022, only ~53% of trading happened on traditional exchanges. This means that almost half of trading activity did not register in traditional market data feeds (stock prices) from stock exchanges. This trading is happening behind the curtain, in private dark pools, unbeknownst to the average investor.
It’s not generally a great idea, as an investor, to make decisions based on half of the total market and trading data. A complete picture of the market is necessary in order to make wise investment decisions. Accessing and analyzing dark pool data is a great way to identify major trades happening on the market, anticipate big swings in stock prices, or find out how and why the bigger institutions are making big trading decisions.
Accessing traditional market data (stock prices) is challenging in and of itself. Stock exchanges like Nasdaq, Nyse and CBOE distribute a variety of market data feeds and it can be dificult to determine which type of data is best for you. There’s also a mountain of paperwork, exchange fees to pay, and complicated access methods.
Accessing dark pool data can be tricky as well, since it happens “off” the traditional exchanges. The stock prices from dark pool trades still show up in the traditional exchange feeds, but a blank field is presented where there would typically be an “exchange” variable to explain which exchange the trade happened on.
There’s some significnat engineerig work required in order to filter out all of the trades that are happening off-exchange in dark pools by searching for that blank field. It can cost a lot of time, money, and effort for you or your team to set up this filtering process and maintain it over time. If you aren’t a financial market data company it can become a burdensome distraction.
A better option for investors, quants, and fintech developers is to license a Dark Pool data feed from a traditiona data vendor. Large companies like Bloomberg an FactSet offer this data, but they typically bundle it up in comprehensive packages, charge steep prices, and have a tedious and lenghty sales cycle.
Smaller companies, like Intrinio, have started to offer the data in a much more affordable and accessible way.
As of March 2023, Intrinio offers a robust and powerful Dark Pool data set. The Dark Pool data is available as part of our Stock Prices Packages - Bronze, Silver, or Gold. You can access the data via API, WebSocket, or bulk download, and it comes with our full suite of developer tools. Engineers will love our powerful API, detailed documentation, and software development kits (SDKs) in all of the major programming languages. These tools mean that you and your team can get the data flowing in a matter of minutes.
Intrinio also offers some of the best support in the financial data industry. As you get started accessing Dark Pool data, our team will be here to chat with you or pick up the phone if you have questions or run into issues.
Given the volume of trading happening in Dark Pools, it’s imperative that you keep a pulse on dark pool data. It is a critical component of any smart investment strategy, and it’s important information to display to end users if you are building investment and trading applications.
If you are interested in taking a free trial of Intrinio’s Dark Pool Data set, chat with our team today. We’ll get the data flowing for you!