Computer Trading and Dark Pools 222
Bob the Super Hamste writes "CNN Money has an article on computerized trading; specifically, the non-public markets that are often used to execute orders. The company that the article discusses executes 1/8 of all stock trades in the U.S., or about 900 million trades a day. For comparison, the NYSE executes about 700 million trades. The article discusses 'dark pools,' or private markets where quotes aren't disclosed to the broader public markets. If the company is unable to fill an order from within its own dark pool, it will submit the order to the broader public market (13 public exchanges), as well as up to 20 other private dark pools. The quotes offered by the private dark pools, by law, have to be the same or a better quote than those offered on public exchanges. There have been recent questions about whether the quotes provided by dark pools have been the best for customers and there is a current investigation by FINRA into the methods used by market makers and dark pool operators to fill orders."
Re:If the question is: (Score:1, Informative)
Re:"have to be the same or better" (Score:5, Informative)
How can a quote be "better"?
Well, Slashdot quotes would be better if we could specify who we're quoting, but you probably meant a market "quote". Assuming TFS means "bid or ask", it's better if it's better for each party trying to trade. That doesn't mean that either the buy or the seller is getting a bad price.
The usual state of a market at any given moment is that a "bid-ask gap" exists - when the best price someone is willing to buy at is lower than the best price someone is willing to sell at, so no trade can happen just at that moment.
Market makers make their money in between the bid and ask, by doing "time arbitrage" (not strictly arbitrage, because they carry risk). For example, if in the instant you can buy for 102, or sell for 100, the market maker might make a better offer: "you can sell to me for 100.50". He's hoping a buyer will come along before the price moves much to who he can say "you can buy from me for 101.50". Those prices are better than anyone else is offering, and still the market maker makes money - at the risk of the price moving enough where he takes a loss.
Re:Trusting banks (Score:5, Informative)
It's about prices. (Score:5, Informative)
I worked at a dark pool.
When a whale buys or sells a sizable amount of stock in the public market it moves the price. When they execute the trade it doesn't happen all at once but in blocks. When bids and offers are made other players in the market see it and they try to jump on. This moves the price. The whale would like the price not to move so they can maximize profit. When trades are executed in a dark pool the market doesn't see the trades until they clear at the end of the day. Who trades in a dark pool you might ask? Other whales. Stocks traded in a dark pool are usually fairly distributed between groups of buyers and sellers so no one trading party has an advantage.
Re:If the question is: (Score:5, Informative)
He said, "We may not always be able to prevent collapses, but any bank that is too big to fail (ie, any bank that takes government money) needs to be broken up and sold off in pieces to prevent it from happening again."
The way things are now, we're just waiting for another collapse. Nothing was fixed from the last time.
Re:Trusting banks (Score:3, Informative)
Because those Bush years of steady 5-6% high unemployment were horrible, no? Those Bush years where a majority actually had a full-time job were bad, right? Look how work force participation has fallen off a cliff starting, oh, around 2009 or so.
If you've got the balls to learn something, I'll clue you in on something called cause and effect. That awful unemployment rate was caused by the financial crisis of 2007–08 [wikipedia.org].
Re:Dark pool, eh?? (Score:2, Informative)
Unless you have anything to back up any of your statement, which for the uninformed, may otherwise look believable, or even plausible?
His statements are backed up by the observations of the new upper middle class slashdot that you didnt grow to be a part of. You see, when you earn a decent living it is in your best interest to learn the mechanics of stock trading, which most of the successful on slashdot have done.
Brokerage houses arent magic undecipherable black boxes. Not only can you actually learn the mechanics of how they work, its actually easy to do so. Try the public library, or this new fangled internet thing. I've known that brokerage houses handle trades in-house before going to the exchange for almost 3 decades, because I decided to learn something about trading stocks before getting involved. I learned it from books freely available in the public library, books produced specifically as primers for the average person that wanted to know more before getting involved.
I know its a radical idea, but learning about things is often quite easy.