Hacker News Board Hacker News, browsed like a classic message board
Live data from Hacker News

Wall Street’s ‘Private Rooms’

bloomberg.com

Post reply on HN
Print view View original

121–130 of 213 posts

Re: Wall Street’s ‘Private Rooms’

#121

Post by throwaway2037 »

hayst4ck wrote: post #90
gruez wrote: post #55

>They’re offering what are dubbed private rooms, gated venues that take the core benefit of a dark pool — the ability to hide big equity deals so they won't impact prices — and add exclusivity, specifying exactly who can partake in any trade. I'm not sure what all the consternation is about. Even without dark pools you could always do direct trades[1] with a party of your choosing, which is even more private and excl…

> won't impact prices I strongly suspect that wall street has looked at 401k's/index funds as a giant money filled piñata. It is a huge pile of money following a well understood algorithm which makes it vulnerable to attack. I suspect that this is the absolute core of "dark pool" strategy. Any trade that happens behind closed doors that "doesn't impact prices" means that an index fund is buying or selling at a price…

For the record, all large index funds pay a 3rd party to guarantee index rebalance is within X basis points of close. It is reasonably large business for equity portfolio trading desks at investment banks. The margins is pretty damn tight, and the asset manager certainly get better fills than trying to do it themselves on the open market.

Re: Wall Street’s ‘Private Rooms’

#122

Post by jsemrau »

thescriptkiddie wrote: post #113
gruez wrote: post #55

>They’re offering what are dubbed private rooms, gated venues that take the core benefit of a dark pool — the ability to hide big equity deals so they won't impact prices — and add exclusivity, specifying exactly who can partake in any trade. I'm not sure what all the consternation is about. Even without dark pools you could always do direct trades[1] with a party of your choosing, which is even more private and excl…

isn't that illegal?

In some cases that is intended behavior. Also look at block trades - https://www.investopedia.com/terms/b/blocktrade.asp

Re: Wall Street’s ‘Private Rooms’

#123

Post by chii »

throwaway2037 wrote: post #120
gruez wrote: post #55

>They’re offering what are dubbed private rooms, gated venues that take the core benefit of a dark pool — the ability to hide big equity deals so they won't impact prices — and add exclusivity, specifying exactly who can partake in any trade. I'm not sure what all the consternation is about. Even without dark pools you could always do direct trades[1] with a party of your choosing, which is even more private and excl…

Agree: They are called block trades in equities. Also, another benefit of a dark pool is that you can pay to control who you trade with. On the primary exchange, it is dog-eat-dog. This is why long-only asset managers prefer block trades for supersize trades, and dark pools for smaller trades. To me, the practice of paying for (non-toxic retail) flow is way more suspicious than dark pools. This is how Robin Hood can…

> to another firm that can front run it.

to be legal, the broker selling your order flow must give the price you're supposed to have gotten to be at or lower than the best price from the market. I dont get how front running could work under this legal rule.

Re: Wall Street’s ‘Private Rooms’

#124

Post by Dylan16807 »

derf_ wrote: post #114
gruez wrote: post #95

Earlier quoted context omitted.

>I suspect that this is the absolute core of "dark pool" strategy. Any trade that happens behind closed doors that "doesn't impact prices" means that an index fund is buying or selling at a price other than the "real" price meaning that dark pools are functionally a wealth transfer from grandma to an institutional trader. Is there evidence for this, or this all baseless speculation?

These kinds of wealth transfers have been studied, and you do not need dark pools for them, just predictable trading patterns. See, e.g., https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5080459 on index funds or https://papers.ssrn.com/sol3/papers.cfm?abstract_id=5122748 on funds that maintain a certain ratio of stocks to bonds (e.g., target-date funds). These costs can be larger than the actual management fees o…

The evidence being asked for is that dark pools and rooms will increase this effect.

Re: Wall Street’s ‘Private Rooms’

#125

Post by chii »

derf_ wrote: post #116
roenxi wrote: post #89

Earlier quoted context omitted.

And what would the problem be with that example? It seems everyone has agreed on a fair price and is trading on it. There isn't any incentive for the private traders to trade at a different price or one of them is getting ripped off due to the arbitrage potential. And they don't believe that publicising the trade would move the price or - again - one of them would have an incentive to do so because it'd move in their…

Ask yourself: if 99% of the volume is being traded inside the house, how much easier is it to move the "fair" price in that street auction?

but people trading inside the house would know this already. If they suspect that the fair price is being manipulated, why would they continue to buy inside the house?

Re: Wall Street’s ‘Private Rooms’

#126

Post by chii »

tester756 wrote: post #96
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.

For me stock market should be about transparency of trades. Of course small trades aren't relevant, but big ones should be visible.

i thought these "dark pools" are visible _after_ their trades have completed.

The information about someone _wanting_ to buy or sell a large amount, is hidden via the dark pool, so that this order doesn't make the public markets move.

Re: Wall Street’s ‘Private Rooms’

#127

Post by Dylan16807 »

hattmall wrote: post #104
roenxi wrote: post #89

Earlier quoted context omitted.

And what would the problem be with that example? It seems everyone has agreed on a fair price and is trading on it. There isn't any incentive for the private traders to trade at a different price or one of them is getting ripped off due to the arbitrage potential. And they don't believe that publicising the trade would move the price or - again - one of them would have an incentive to do so because it'd move in their…

You are disadvantaged as an outsider because you don't know who is buying or selling and how much they are trading. You don't know the demand levels at various price points. If, for example, you want to buy Stock A which is currently trading for $5 and sell it for $6, but there is someone trying to sell 5 million shares for $5.05 but you can't see that you can't make an informed decision on ideal price points for you…

> you want to buy Stock A which is currently trading for $5 and sell it for $6

It sounds like I'm asking for a pony in this scenario. I shouldn't expect to get that.

If I want to buy at $5 and hold it for more than a day, I don't think the secrecy of that big sale really affects me. It'll be over soon enough.

Re: Wall Street’s ‘Private Rooms’

#128

Post by outer_web »

rqtwteye wrote: post #118
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"

I used to be friends with some finance guys around 2008 and they told me the same thing. Retail investors are basically suckers to them who can be exploited.

How'd their 2008 go?

Re: Wall Street’s ‘Private Rooms’

#130

Post by nairboon »

chii wrote: post #123
throwaway2037 wrote: post #120

Earlier quoted context omitted.

Agree: They are called block trades in equities. Also, another benefit of a dark pool is that you can pay to control who you trade with. On the primary exchange, it is dog-eat-dog. This is why long-only asset managers prefer block trades for supersize trades, and dark pools for smaller trades. To me, the practice of paying for (non-toxic retail) flow is way more suspicious than dark pools. This is how Robin Hood can…

> to another firm that can front run it. to be legal, the broker selling your order flow must give the price you're supposed to have gotten to be at or lower than the best price from the market. I dont get how front running could work under this legal rule.

OP just provided an explanation for Robin Hood's business model, it was never stated that Robin Hood operates in accordance with the law. In fact it is well known, that Robin Hood operated illegally for a long time and got fined by the SEC for its violations: https://www.sec.gov/newsroom/press-releases/2025-5
Post reply on HN