Dark Pool Trading and Information Acquisition

66 Pages Posted: 9 Nov 2018 Last revised: 6 May 2020

See all articles by Jonathan Brogaard

Jonathan Brogaard

University of Utah - David Eccles School of Business

Jing Pan

Southern Methodist University

Date Written: May 5, 2020

Abstract

Theory suggests that dark pools may facilitate or discourage information acquisition. We find that more dark pool trading leads to greater information acquisition. To overcome endogeneity concerns, we exploit a large exogenous decrease to dark pool trading that results from the implementation of the Security and Exchange Commission’s (SEC’s) Tick Size Pilot Program. The results cannot be explained by lit venue liquidity, algorithmic trading, or informational efficiency. In support of the information acquisition interpretation, we document a shift in information acquisition through SEC EDGAR searches. Overall, the evidence suggests that dark pool trading increases information acquisition.

Keywords: Dark pools, informed trades, earnings information, price informativeness

JEL Classification: G14; G18

Suggested Citation

Brogaard, Jonathan and Pan, Jing, Dark Pool Trading and Information Acquisition (May 5, 2020). Available at SSRN: https://ssrn.com/abstract=3281472 or http://dx.doi.org/10.2139/ssrn.3281472

Jonathan Brogaard (Contact Author)

University of Utah - David Eccles School of Business ( email )

1645 E Campus Center Dr
Salt Lake City, UT 84112-9303
United States

HOME PAGE: http://www.jonathanbrogaard.com

Jing Pan

Southern Methodist University ( email )

Cox School of Business
6212 Bishop Blvd
Dallas, TX 75275
United States

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