Diving Into Dark Pools
University of Toronto - Rotman School of Management
Bocconi University and IGIER and CAREFIN
Ingrid M. Werner
The Ohio State University - Fisher College of Business
June 1, 2010
Charles A. Dice Center Working Paper No. 2010-10
Fisher College of Business Working Paper No. 2010-03-010
This paper examines unique data on dark pool activity for a large cross-section of US stocks in 2009. Dark pool activity is concentrated in large firms, stocks with high share volume, high price, low spreads, high depth, and low short-term volatility. NASDAQ (AMEX) stocks have significantly higher (lower) dark pool activity than NYSE stocks controlling for size, share volume, and price. For a given stock, dark pool activity is significantly higher on days with higher share volume, higher depth, and lower intraday volatility. Dark pool activity is significantly lower for days with larger order imbalances relative to share volume and larger absolute returns. We find no evidence supporting the hypothesis that dark pool activity has a detrimental effect on market quality.
Number of Pages in PDF File: 43
Keywords: Dark pools, fragmentation, market quality, price discovery, market efficiency, SEC, microstructure
JEL Classification: G10, G12, G14, G18, G20
Date posted: June 26, 2010 ; Last revised: July 11, 2015
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