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Diving Into Dark Pools

Charles A. Dice Center Working Paper No. 2010-10

Fisher College of Business Working Paper No. 2010-03-010

59 Pages Posted: 26 Jun 2010 Last revised: 29 Mar 2016

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: November 17, 2011

Abstract

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 liquid stocks. Nasdaq (AMEX) stocks have significantly higher (lower) dark pool activity than NYSE stocks controlling for liquidity. For a given stock, dark pool activity is significantly higher on days with high share volume, high depth, low intraday volatility, low order imbalances relative to share volume, and low absolute returns. Results show that increased dark pool activity improves market quality measures such as spreads, depth, and short-term volatility. The relationship between dark pool activity and measures of price-efficiency is more complex.

Keywords: Dark pools, fragmentation, market quality, price discovery, market efficiency, SEC, microstructure

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

Suggested Citation

Buti, Sabrina and Rindi, Barbara and Werner, Ingrid M., Diving Into Dark Pools (November 17, 2011). Charles A. Dice Center Working Paper No. 2010-10; Fisher College of Business Working Paper No. 2010-03-010. 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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