Competing for Dark Trades

Arbeitspapier

We use recent European restrictions to evaluate how traders substitute across available dark pools. Our findings suggest that restricting dark trading at the most prominent platform has a detrimental effect on dark trading activity. Annual dark trading in a restricted stock decreases by more than 50% over the six-month restriction period. Consistent with investors' sticky relationships with specific dark pools, our results suggest that substitution across dark pools is remarkably low. Despite the availability of alternative dark pools, traders are unwilling to trade elsewhere. Our study provides evidence that dark trading is not a market of exchanges, but rather a collection of independent silos. This fact has implications for the vulnerability of dark trading to the introduction of an HFT into the pool, and sharpens our understanding of how the pecking order theory of trading actually functions.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Tinbergen Institute Discussion Paper ; No. TI 2023-020/IV

Classification and Topics

• Classification: Wirtschaft ; Asset Pricing; Trading Volume; Bond Interest Rates ; Information and Market Efficiency; Event Studies; Insider Trading ; General Financial Markets: Government Policy and Regulation ; Market Design
• Subject: MiFID II ; dark pool trading ; competition

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Irvine, Paul J. ; Karmaziene, Egle
• Event: Veröffentlichung
• (who): Tinbergen Institute
• (where): Amsterdam and Rotterdam
• (when): 2023

Further information

• Handle: http://hdl.handle.net/10419/273831
• Last update: 10.03.2025, 11:42 AM CET