7 ms·

Darker Than a Dark Pool? Welcome to Wall Street's 'Private Rooms'

18 points by petethomas 2y ago

udev4096 2y ago
https://archive.ph/Xfk2V https://archive.ph/Xfk2V
xg15 2y ago
Of course absolutely no risk that this is used for collusion or to execute backroom deals. Nope, nothing to see here...
JumpCrisscross 2y ago
"There are myriad reasons why users may opt for private rooms. Take the case of CastleOak Securities, a New York-based minority-run brokerage. The firm wants to trade with similarly minded businesses, so it uses a private room provided by the ATS operator OneChronos." Oh boy.
- blackeyeblitzar 2y ago
  Could you clarify what the “oh boy” is for? Is it something to do with the minority run aspect, like they were doing something illegal with other minority run firms?
  - JumpCrisscross 2y ago
    > were doing something illegal with other minority run firms? At face value it raises the question: do we want securities traded on the basis of race. More pragmatically: let's assume we do. This isn't the administration under which I'd be voluntarily drawing attention to that.
- stephen_cagle 2y ago
  Wow, at first I assumed that you were wrong and "minority owned" meant like "minority shareholder" or some economic thing, but Claude seems to agree with your interpretation. That just seems... wild. We are talking about something as fungible as money (or shares), and we are literally saying that we prefer for trading of those monies to come from people who have a certain racial or ethnic background. I'm genuinely surprised that this isn't somewhat illegal? I suspect that I am misunderstanding something though.
  - s1artibartfast 2y ago
    It's not that shocking to me. Even the federal government engages in this kind of behavior. For example, the 8(A) business development program has been around since the late 70's, and sets aside government contracts for businesses owned by minorities and the socially disadvantaged. What this firm is doing is far less extreme.
  - kasey_junk 2y ago
    These policies historically were a reaction to de facto or de jure restrictions on minorities in mainline financial institutions. Black banks especially were chartered to support African Americans who were not allowed to be involved with mainline banks.
challenger-derp 2y ago
As I understand it, for retail market participants, the concern of dark trading venues is at least twofold: 1. With some brokerages, retail orders are prioritized for dark venues over lit ones (i.e., first routed to see if they can be fulfilled on dark venues, otherwise, then route to lit ones) where they are essentially trading against more knowledgeable participants. A common argument in favor of this, oft cited by dark pool operators and affliated brokerages is that on average, historically, better prices for all participants have been attained with the assistance of dark pools. Relatedly, on many trading venues, even lit ones, trade orders are demarcated to distinguish between retail and non-retail – a feature visible to larger participants like MMs and one would imagine high volume participants – which is essentially extra information to a subset of participants that indicate that an order is safer to trade against. 2. Dark venues operate outside the standard public exchange framework. Trade orders are not _as_ visible to the broader market. This lack of transparency can disadvantage retail, who don’t have equal insight into the supply or demand of shares. This opacity possibly hinders price discovery of the "real" price.
monkeydust 2y ago
Can someone who in the know explain what a 'Private Room' actually is - on initial read sounds like a chat room but now I am thinking its more of a closed group of participants who can see/transact on electronic bids/offers.

18 points by petethomas 2y ago

udev4096 2y ago

https://archive.ph/Xfk2V https://archive.ph/Xfk2V

xg15 2y ago

Of course absolutely no risk that this is used for collusion or to execute backroom deals. Nope, nothing to see here...

JumpCrisscross 2y ago

"There are myriad reasons why users may opt for private rooms. Take the case of CastleOak Securities, a New York-based minority-run brokerage. The firm wants to trade with similarly minded businesses, so it uses a private room provided by the ATS operator OneChronos." Oh boy.

blackeyeblitzar 2y ago
Could you clarify what the “oh boy” is for? Is it something to do with the minority run aspect, like they were doing something illegal with other minority run firms?
- JumpCrisscross 2y ago
  > were doing something illegal with other minority run firms? At face value it raises the question: do we want securities traded on the basis of race. More pragmatically: let's assume we do. This isn't the administration under which I'd be voluntarily drawing attention to that.
stephen_cagle 2y ago
Wow, at first I assumed that you were wrong and "minority owned" meant like "minority shareholder" or some economic thing, but Claude seems to agree with your interpretation. That just seems... wild. We are talking about something as fungible as money (or shares), and we are literally saying that we prefer for trading of those monies to come from people who have a certain racial or ethnic background. I'm genuinely surprised that this isn't somewhat illegal? I suspect that I am misunderstanding something though.
- s1artibartfast 2y ago
  It's not that shocking to me. Even the federal government engages in this kind of behavior. For example, the 8(A) business development program has been around since the late 70's, and sets aside government contracts for businesses owned by minorities and the socially disadvantaged. What this firm is doing is far less extreme.
- kasey_junk 2y ago
  These policies historically were a reaction to de facto or de jure restrictions on minorities in mainline financial institutions. Black banks especially were chartered to support African Americans who were not allowed to be involved with mainline banks.

challenger-derp 2y ago

As I understand it, for retail market participants, the concern of dark trading venues is at least twofold: 1. With some brokerages, retail orders are prioritized for dark venues over lit ones (i.e., first routed to see if they can be fulfilled on dark venues, otherwise, then route to lit ones) where they are essentially trading against more knowledgeable participants. A common argument in favor of this, oft cited by dark pool operators and affliated brokerages is that on average, historically, better prices for all participants have been attained with the assistance of dark pools. Relatedly, on many trading venues, even lit ones, trade orders are demarcated to distinguish between retail and non-retail – a feature visible to larger participants like MMs and one would imagine high volume participants – which is essentially extra information to a subset of participants that indicate that an order is safer to trade against. 2. Dark venues operate outside the standard public exchange framework. Trade orders are not _as_ visible to the broader market. This lack of transparency can disadvantage retail, who don’t have equal insight into the supply or demand of shares. This opacity possibly hinders price discovery of the "real" price.

monkeydust 2y ago

Can someone who in the know explain what a 'Private Room' actually is - on initial read sounds like a chat room but now I am thinking its more of a closed group of participants who can see/transact on electronic bids/offers.