Abstract

http://ssrn.com/abstract=2183392
 
 

References (30)



 
 

Citations (4)



 
 

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Dark Trading and Price Discovery


Carole Comerton-Forde


University of Melbourne - Department of Finance; Financial Research Network (FIRN)

Tālis J. Putniņš


University of Technology, Sydney - UTS Business School; Stockholm School of Economics in Riga; Financial Research Network (FIRN)

November 19, 2013


Abstract:     
Regulators around the world are concerned that growth in dark trading may harm price discovery. We find that low levels of dark trading can be beneficial, but high levels impede price discovery and reduce the informational efficiency of prices. One reason dark trading can be harmful is that the lack of pre-trade information reduces the market’s ability to infer and incorporate private information. Uninformed trades are more likely to execute in the dark, which increases adverse selection risk and bid-ask spreads in the transparent exchange. We find no evidence that block trades in the dark impede price discovery.

Number of Pages in PDF File: 56

Keywords: dark pool, price discovery, information share, efficiency

JEL Classification: G14

working papers series


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Date posted: December 2, 2012 ; Last revised: November 20, 2013

Suggested Citation

Comerton-Forde, Carole and Putniņš, Tālis J., Dark Trading and Price Discovery (November 19, 2013). Available at SSRN: http://ssrn.com/abstract=2183392 or http://dx.doi.org/10.2139/ssrn.2183392

Contact Information

Carole Comerton-Forde (Contact Author)
University of Melbourne - Department of Finance ( email )
198 Berkeley Street
Carlton VIC 3010
Australia
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

Talis J. Putnins
University of Technology, Sydney - UTS Business School ( email )
PO Box 123
Broadway
Sydney
Australia
+61 2 95144022 (Phone)
Stockholm School of Economics in Riga ( email )
Strelnieku Iela 4a
Riga, LV1010
Latvia
+371 67015841 (Phone)
Financial Research Network (FIRN)
C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia
HOME PAGE: http://www.firn.org.au

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References:  30
Citations:  4
Footnotes:  30

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