Diving Into Dark Pools

Charles A. Dice Center Working Paper No. 2022-01

Fisher College of Business Working Paper No. 2022-03-01

78 Pages Posted: 26 Jun 2010 Last revised: 14 Feb 2022

See all articles by Sabrina Buti

Sabrina Buti

Université Paris Dauphine - Department of Finance

Barbara Rindi

Bocconi University and IGIER and Baffi Carefin

Ingrid M. Werner

The Ohio State University - Fisher College of Business

Date Written: January 31, 2022

Abstract

We study 2009 and 2020 dark trading for U.S. stocks. Dark trading is lower when volume is low, volatility high, and in periods of markets stress. Dark pools are more active for large caps, while internalization is more common for small caps. Traders use dark pools to jump the queue for large caps in 2009, and to avoid crossing the spread for small caps in both years. Internalization is higher when spreads are wide and depth is high. Dark pool trading improves spreads in 2009, but worsens market quality for large caps in 2020. We discuss explanations for the change.

Keywords: Dark pools, dark trading, internalization, fragmentation, market quality, microstructure

JEL Classification: G10, G12, G14, G18, G20

Suggested Citation

Buti, Sabrina and Rindi, Barbara and Werner, Ingrid M., Diving Into Dark Pools (January 31, 2022). Charles A. Dice Center Working Paper No. 2022-01, Fisher College of Business Working Paper No. 2022-03-01, Available at SSRN: https://ssrn.com/abstract=1630499 or http://dx.doi.org/10.2139/ssrn.1630499

Sabrina Buti

Université Paris Dauphine - Department of Finance ( email )

Place du Maréchal de Lattre de Tassigny
Paris Cedex 16, 75775
France

Barbara Rindi

Bocconi University and IGIER and Baffi Carefin ( email )

Via Roentgen 1
Milan, 20136
Italy
+39 58365328 (Phone)

HOME PAGE: http://faculty.unibocconi.eu/barbararindi

Ingrid M. Werner (Contact Author)

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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