Everything You need To Know About Dark Pools In The Stock Market

This video is about everything you need to know about dark pool in the stock market.
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Dark pools are secret markets where investors can trade securities that are not available to the general public. These exchanges are often called as "black pools of liquidity," a reference to their utter lack of transparency. Dark pools were created largely to make block trading easier for institutional investors who didn't want their massive orders to disrupt the markets and result in unfavorable trade prices.
Dark pools are sometimes portrayed in a negative light, although they serve a useful purpose by allowing massive trades to take place without disrupting the rest of the market. Their lack of transparency, on the other hand, makes them exposed to potential conflicts of interest on the part of their owners and predatory trading activities on the part of some high-frequency traders.
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Getting to Know the Dark Pool:
When the Securities and Exchange Commission (SEC) allowed brokers to trade big blocks of shares in the 1980s, dark pools arose. Electronic trading, as well as a 2007 SEC regulation aimed at increasing competition and lowering transaction costs, has sparked an increase in the number of dark pools. Because dark pools are generally hosted within a major corporation rather than a bank, they can charge cheaper costs than exchanges.
Bloomberg LP, for example, owns the dark pool Bloomberg Tradebook, which is registered with the Securities and Exchange Commission.
Institutional investors used dark pools for block trades involving a large number of stocks at first. Dark pools, on the other hand, are no longer reserved for huge orders.
According to a Celent study, the average order size has decreased from 430 shares in 2009 to around 200 shares in 2013. This is due to block orders going to dark pools.
The main benefit of dark pool trading is that institutional investors can make huge trades without exposing themselves while looking for buyers and sellers. This avoids a significant price devaluation that would otherwise occur.
The Benefits of Dark Pools:
Non-exchange trading has recently grown in popularity in the United States, according to the CFA Institute. According to estimates, it accounted for over 40% of all stock trading in the United States in 2017, up from an estimated 16% in 2010. According to the CFA, dark pools accounted for 15% of total volume in the United States in 2014.
Why were dark pools created in the first place? Consider the choices available to a major institutional investor looking to sell one million shares of XYZ stock before non-exchange trading was introduced. 
This investor could do one of the following:
1. Work the order through a floor trader over one or two days and hope for a reasonable volume-weighted average price.
2. Divide the order into five pieces, for example, and sell 200,000 shares per day.
3. Sell tiny quantities at a time until a large buyer is discovered who is willing to buy all of the remaining shares.
The market impact of selling one million XYZ shares may still be significant regardless of the investor's choice, as it was not possible to conceal the investor's identity or intent in a stock exchange transaction. The risk of a decline in the period while the investor was waiting to sell the remaining shares was similarly considerable with alternatives two and three. One solution to these problems was the use of dark pools.
Why Would You Use a Dark Pool?
Compare this to today's situation, when an institutional investor can sell a one million share block through a dark pool.
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Видео Everything You need To Know About Dark Pools In The Stock Market канала Stocks Galore - Investing & Personal Finance