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Wall Street’s ‘Private Rooms’

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Re: Wall Street’s ‘Private Rooms’

#21

Post by ikmckenz »

radlad wrote: post #13
Nifty3929 wrote: post #10

It is not clear to me what nefarious things people believe are going on there that we should be worried about. All the article says is that people are doing things we don't know about, but implies that somehow we should feel not-okay about this. I don't know what's going on in my neighbor's house either, and it could certainly be bad stuff, but that's doesn't mean that it is bad or that I should start spying on them.

Isn't the problem that this allows for all kinds of forms of insider trading? > Insider trading—the practice of buying or selling a company's securities based on material, nonpublic information—has long been a contentious issue in financial markets. https://www.investopedia.com/terms/i/insidertrading.asp There's also a question of whether they are good for the health of the overall market: https://www.cbsnews.com/new…

> Isn't the problem that this allows for all kinds of forms of insider trading?

No, it doesn't. All trades are made public after they happen, as per regulations. There is no difference to insider trading regulations if a bad actor trades via a lit exchange or via a dark pool. Dark pools only "hide" pre-trade information, such as standing buy or sell limit orders.

Re: Wall Street’s ‘Private Rooms’

#22

Post by LatteLazy »

Nifty3929 wrote: post #8
qweiop wrote: post #6

I remember reading about dark pools and asking a friend in finance if the sector really is as corrupt as it sounds, his reply? "Oh much more"

Did he elaborate on this?

Goldman and others got in trouble for selling access to the supposedly secret orders in their dark pools back in the day.

They were fined 800k I think?

I believe dark pools started growing post flashboys when people realising what hft meant and wanted an escape (see comment below). But as they got big they became a target in and of themselves (ecology in action I guess).

I worked in algo trading at the time (not hft, but anti hft)

Re: Wall Street’s ‘Private Rooms’

#23

Post by reverendsteveii »

Nifty3929 wrote: post #10

It is not clear to me what nefarious things people believe are going on there that we should be worried about. All the article says is that people are doing things we don't know about, but implies that somehow we should feel not-okay about this. I don't know what's going on in my neighbor's house either, and it could certainly be bad stuff, but that's doesn't mean that it is bad or that I should start spying on them.

It's manipulation by definition. These hidden trades exist to prevent other people from being able to act in their own best interest based on available information. This isn't about what's going on in your neighbor's house. Your neighbor's house is private, markets are public. This is about being at a public auction in the middle of bidding on something when someone else walks up to the crier, whispers a few words in his ear, and then the crier just quietly says "bidding is closed" and you have no idea who bought the item or for what price but now you have to try to price similar items.

Re: Wall Street’s ‘Private Rooms’

#24

Post by oangemangut »

Nifty3929 wrote: post #10

It is not clear to me what nefarious things people believe are going on there that we should be worried about. All the article says is that people are doing things we don't know about, but implies that somehow we should feel not-okay about this. I don't know what's going on in my neighbor's house either, and it could certainly be bad stuff, but that's doesn't mean that it is bad or that I should start spying on them.

If you look up RegNMS the goal is to make public markets fair by having rules that have to be met in order to trade. Dark pools allow participants to 'hide' information that's not public. It is mostly about the order books. If dark pool sell order for 1B of TSLA stock goes on the order book, only other members of the pool get that information. The dark pools are required to still follow RegNMS rules for trade prices, but there is an inherent asymmetry in the market information in this case as the dark pool participants can see the public markets and their dark pool in order to make trading decisions.

In your neighbor's house example, it would be like if there was a street market auction for trading cards happening in your neighbor's front yard, but in the house your neighbor and another neighbor had gotten together to trade 100x the average #of cards using the prices they hear from outside, and the people outside only see the deal they made after it's done.

Re: Wall Street’s ‘Private Rooms’

#25

Post by ikmckenz »

ajross wrote: post #18
radlad wrote: post #13

Earlier quoted context omitted.

Isn't the problem that this allows for all kinds of forms of insider trading? > Insider trading—the practice of buying or selling a company's securities based on material, nonpublic information—has long been a contentious issue in financial markets. https://www.investopedia.com/terms/i/insidertrading.asp There's also a question of whether they are good for the health of the overall market: https://www.cbsnews.com/new…

It's by definition insider trading. If they made the trades in public the market price would change to reflect the demand. They don't want that to happen, they want the trade to happen at a non-market price set by people with information about the deal.

No, "I am XYZ hedge fund and I want to buy stock ABC" is not material non-public information to XYZ hedge fund. If it was, any buying or selling of stocks would always be illegal, since you would be "insider trading" on your desire to buy the stock.

Re: Wall Street’s ‘Private Rooms’

#26

Post by Vecr »

potato3732842 wrote: post #15
jimbob45 wrote: post #3

Carlos Cabana, head of equity sales and trading at CastleOak, dubs the room a “diversity pool,” because the participants are all minority-operated brokerage firms. While in this instance CastleOak doesn’t know specifically who is on the other side of every trade, it knows it will be one of about 10 counterparties who meet certain eligibility criteria related to ownership and investment goals. I am convinced that they…

It's far more likely that it's a tongue in cheek inside joke than it is they care what outsiders think. Or it's an internal reference that's a dig at someone or something and was never meant to be made public (these firms are small enough this kind of stuff can happen). Non-consumer facing finance is just about the least diversity conscious industry ever. They only care about green. Source: work in industry.

It's a dark pool.

Re: Wall Street’s ‘Private Rooms’

#27

Post by markus_zhang »

qweiop wrote: post #6

I remember reading about dark pools and asking a friend in finance if the sector really is as corrupt as it sounds, his reply? "Oh much more"

Back in the day when I was day trading in a firm, dark pool was pretty much the only place that I could offload some stocks quicly when they went the other way. It was pricey though so we were told to use it as a last resort.

Re: Wall Street’s ‘Private Rooms’

#28

Post by tremarley »

ajsnigrutin wrote: post #20

Ban high frequency trading, ban instant transactions (put them on hold for some time before buying/selling (hours minmum, longer for larger quantities), make the held transactions public, and tax the profits on a time-owned scale. This would turn "investments" into investments again... you really believe that company XY will do something good? Buy stocks and keep them for few years until they grow. Politican John Bob…

Banning something doesn’t make it go away.

Millions of people will be doing it, irregardless if it’s banned or not.

The best thing you can do is let it happen, monitor it and call out bad actors.

Re: Wall Street’s ‘Private Rooms’

#29

Post by jandrese »

ajsnigrutin wrote: post #20

Ban high frequency trading, ban instant transactions (put them on hold for some time before buying/selling (hours minmum, longer for larger quantities), make the held transactions public, and tax the profits on a time-owned scale. This would turn "investments" into investments again... you really believe that company XY will do something good? Buy stocks and keep them for few years until they grow. Politican John Bob…

But mah liquidity!!!

I'm not sure what value you are getting out of the second paragraph. If some politician dumps a ton of stock X and I go "oh no, I'd better get out of that as well", won't I still be in line behind not only the politician but also everybody who has bots that automatically act on his actions within nanoseconds? It gives you warning that a stock is about to crater, but there's nothing you can do about it without giving someone the power to jump the line, and power like that can only be abused.

Re: Wall Street’s ‘Private Rooms’

#30

Post by jandrese »

tremarley wrote: post #28
ajsnigrutin wrote: post #20

Ban high frequency trading, ban instant transactions (put them on hold for some time before buying/selling (hours minmum, longer for larger quantities), make the held transactions public, and tax the profits on a time-owned scale. This would turn "investments" into investments again... you really believe that company XY will do something good? Buy stocks and keep them for few years until they grow. Politican John Bob…

Banning something doesn’t make it go away. Millions of people will be doing it, irregardless if it’s banned or not. The best thing you can do is let it happen, monitor it and call out bad actors.

Calling out bad actors doesn't work so well if said actors have no shame.
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