Banks Erik. Dark Pools

Second Edition. — Palgrave Mcmillan, 2014. — 267 p.This book deals with the topic of dark trading, or non-displayed, off-exchange trading execution. It discusses the development, importance and practice of dark equity trading in an environment dominated by high frequency, program, block and algorithmic trading, and considers its future prospects in a world of mobile capital and changing regulation.The marketplace for securities trading has continued evolving and growing since the first edition of Dark Pools was published in 2010. Specifically, following the devastating market crisis of 2007–2009, which sidelined many participants, an accelerating market recovery began to appear in 2011 and 2012, bringing retail and institutional investors back to the developed and emerging equity and fi xed income markets.
Their return has heralded growth in volume and liquidity, essential ingredients for dark market expansion. In addition, new technologies have been introduced in the programming, hardware, and networking sectors which have led to a new generation of increasingly sophisticated, and rapidly executed, trading strategies – including high frequency/low latency trading and algorithmic trading. Furthermore, a growing focus on cost reduction and profit maximization has caused the largest investors to find ways of employing cost-saving solutions, like low market impact trading and direct market access. Th ese forces, combined with consolidation and restructuring in the exchange and off -exchange sector and a redrafting of market
regulations, have led to a reshaping of the dark pool sector.
Against this background, dark trading remains an important financial market growth sector. By all available statistics – which are still challenging to derive in a market that, by definition, remains opaque – dark trading now accounts for approximately 40% of all U.S. turnover; the European share ranges from 8 to 15% at any point in time, while countries such as Canada and Australia have breached the 10% mark. Collectively, these are significant market shares which have helped solidify the function and legitimacy of the dark market.Given the changes and growth in this important segment of the financial markets, it seems timely and appropriate to bring the original material in Dark Pools up to date and to further expand its scope. The new edition reflects current ideas on micro- and macrostructure and regulations.