The Dark Pool Debate (Credit Suisse)

August 2013

KEYWORDS: dark pools, Exchange-Traded Funds, trading volume, broker-dealer, off-exchange, Trading, disclosures, reporting requirements, Alternative Trading Systems, electronic communication networks, benchmark


Ana Avramovic, Phil Mackintosh

  • Credit Suisse


By their very name, Dark Pools seem to imply shady practices and sinister intent. In reality dark pools are so-called because they mask the actions of their participants (which makes it harder for faster day traders to take advantage of large investors – a good thing, no?). But consider some recent headlines in a variety of sources:


  • “As Market Heats Up, Trading Slips into Shadows”
  • “Dark Pool Growth Hurts Investors, NYSE, Nasdaq Tell Senate”
  • “Dark Pools Threaten Wall Street”
  • “Dark Pools Pick Up Stock-Trading Share”


While these headlines claim that dark pools are commanding an increasing share of US equity volume, to the detriment of market quality, there are several flaws in this storyline (see box on page 2).
In this report, we seek to shed some light on the dark pool debate and dispel many widely held misconceptions. The facts about dark pools may surprise you.


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