Abstract

http://ssrn.com/abstract=1571416
 
 

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Dark Pool Trading Strategies, Market Quality and Welfare


Sabrina Buti


University of Toronto - Rotman School of Management

Barbara Rindi


Bocconi University and IGIER and CAREFIN

Ingrid M. Werner


The Ohio State University - Fisher College of Business

December 1, 2015

Journal of Financial Economics (JFE), Forthcoming
AFA 2012 Chicago Meetings Paper
Charles A. Dice Center Working Paper No. 2010-6
Fisher College of Business Working Paper No. 2010-03-06

Abstract:     
We show that when a continuous dark pool is added to a limit order book that opens illiquid, book and consolidated fill rates and volume increase, but spread widens, depth declines and welfare deteriorates. The adverse effects on market quality and welfare are mitigated when book-liquidity builds but so are the positive effects on trading activity. All effects are stronger when traders' valuations are less dispersed, access to the dark pool is greater, horizon is longer, and relative tick size larger.

Number of Pages in PDF File: 53

Keywords: Dark Pool, Limit Order Book, Trading Strategies

JEL Classification: G10, G20, G24, D40


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Date posted: March 18, 2010 ; Last revised: January 7, 2016

Suggested Citation

Buti, Sabrina and Rindi, Barbara and Werner, Ingrid M., Dark Pool Trading Strategies, Market Quality and Welfare (December 1, 2015). Journal of Financial Economics (JFE), Forthcoming; AFA 2012 Chicago Meetings Paper; Charles A. Dice Center Working Paper No. 2010-6 ; Fisher College of Business Working Paper No. 2010-03-06. Available at SSRN: http://ssrn.com/abstract=1571416 or http://dx.doi.org/10.2139/ssrn.1571416

Contact Information

Sabrina Buti (Contact Author)
University of Toronto - Rotman School of Management ( email )
105 St. George Street
Toronto, Ontario M5S 3E6
Canada
+1 416 946 0551 (Phone)

Barbara Rindi
Bocconi University and IGIER and CAREFIN ( email )
Via Roentgen 1
Milan, 20136
Italy
+39 58365328 (Phone)
HOME PAGE: http://faculty.unibocconi.eu/barbararindi
Ingrid M. Werner
The Ohio State University - Fisher College of Business ( email )
2100 Neil Avenue
Columbus, OH 43210-1144
United States
614-292-6460 (Phone)
614-292-2418 (Fax)

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