Dark Pools
Dark pools, defined in contrast to "lit" trading
venues where trading intentions and activity are visible, provide
access to non-displayed liquidity. A dark pool is an OTC
(over-the-counter) venue for reporting purposes, which has the
practical value that unmatched trade orders are not displayed on
an open order book.
The use of dark pools is typically found where disclosure of
trading intent might prove injurious to price efficiency. For
example, moving a large block of shares onto the market might
impact counterparty pricing; feeding the same block through a
dark pool (in smaller lots) will conceal the size of the overall
trade.
