RiskPicksWhat is a Dark Pool?
A dark pool is a private trading venue where large institutional investors can buy and sell large blocks of shares without displaying their orders on public exchanges. The orders are "dark" because they're not visible in the order book.
Why they exist
- Price impact: a fund buying 1 million shares on a public exchange would push the price up before they finish. Dark pools let them execute without tipping off the market
- Anonymity: institutions don't want others to know their positions
Impact on retail traders
- Dark pool prints: large trades are reported after execution, visible on time and sales
- Dark pool levels: price levels where large dark pool orders executed can act as support/resistance
- Controversy: some argue dark pools reduce transparency and disadvantage retail traders