The NYSE Euronext and other public exchanges have recently increased their efforts to limit or further regulate ‘Dark Pools’ – private trading venues frequently created and used by large financial institutions for anonymous trading.
Dark pools have increasingly gained ground on more established public exchanges or “lit markets” and recently trading volume in those private exchanges overtook trading on the NYSE.
Dark pools may also be used to give privileged people access to pre-IPO trading, and the fight over their role is getting more and more intense.
Kenny Polcari, from O’Neil Securities, and a CNBC Contributor, recently explained the difference between dark pools and lit markets, and he also shed some light on why traders and exchanges, and even individuals might be wary of dark pools:
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