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Wall Street’s ‘Private Rooms’

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Re: Wall Street’s ‘Private Rooms’

#171

Post by infecto »

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 are not disadvantaged because you are not buying 5mm shares. I like to think of it closer to volume pricing rather secret pricing. You could definitely do retail level volume on a pool but you will be paying for it and that cost will generally be higher than any "savings" you may get in price.

Its similar to complaining that someone is buying eggs at wholesales prices while you are paying retail.

Re: Wall Street’s ‘Private Rooms’

#172

Post by infecto »

nairboon wrote: post #136
roenxi wrote: post #132

Earlier quoted context omitted.

^_~ How? Nobody was selling it for $4.90 in that example.

Although the above example was missing some details, I suspected it was meant to illustrate the following effect: The public last price was $5, so bid/ask will be around that price let's say 4.99/5.01, if you buy with a market order you'd pay approximately $5 ($5.01). But if there is a new large sell order for 5 million shares at 5.05, then the market would react to this information and adjust bids & asks. For illust…

Why would volume outside of the NBBO force price down? I think you are also over weighting order book impact to price. There is definitely some information there but with its not always that meaningful.

Re: Wall Street’s ‘Private Rooms’

#173

Post by infecto »

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?

Its more like 50% of total volume being traded in dark pools. Your price argument does not make much sense though, the beauty of western markets is that folks are so opportunistic that someone will exploit any information asymmetry so your argument would not hold up. Also at the end of the day its not like buyers and sellers in a dark pool know "the price" of what they are trading, sure they have ideas of where they might be buyers and sellers but they are still using the lit market data to inform their decision.

Re: Wall Street’s ‘Private Rooms’

#174

Post by infecto »

solatic wrote: post #141
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 insider trading, just with a different class of insiders (i.e. first level of insiders are people associated with the company itself, and the second level of insiders are Wall Street traders with access to non-public pricing signals). Insider trading is illegal because it undermines faith in the fairness of the public market. If insider trading is legal, then market actions by insiders are almost guaranteed to r…

Please don't define things when you have no idea what you are talking about. Everything in this post is simply wrong. Markets are not about information fairness, individuals are free to do research and come up with their own prices.

Re: Wall Street’s ‘Private Rooms’

#175

Post by darod »

Many comments are saying that these rooms have been created to give fund managers the ability to execute large trades while keeping the price similar or close to what is available on the open market. I guess my question is why should they should be allowed to be protected from this type of risk? If they were not protected from this large type of risk, then maybe we would have more competition in the large fund manager space because, like hedge funds have experienced, after managing a certain amount of money there is a diminishing return as others will see and follow your trend.

Re: Wall Street’s ‘Private Rooms’

#176

Post by TuringNYC »

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…

>> 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.

You are speaking about the index rebalance strategy. Worked well, but does not always work well: https://www.bloomberg.com/news/articles/2025-03-08/millenniu...

Re: Wall Street’s ‘Private Rooms’

#177

Post by seabird »

lucianbr wrote: post #164
chii wrote: post #140

Earlier quoted context omitted.

None of those violations are related to trade order flow. The majority are related to customer protections, lack of data retention etc. With perhaps the violations related to the blue sheet data (transaction data), which is used by various financial regulators to sniff out illicit transactions. Robinhood's been accused of selling out their retail customer by allowing HFT firms to frontrun retail trade. And yet, no ev…

The fact that violations happened is clear proof that violations can happen. You asked how RH could do front running when it's illegal - the same way they could and did violate customer protections when it is illegal.

Whether or not Robinhood could do it isn't the right question. The better question is whether or not it would make sense for Robinhood or any other actor to front run microscopic retail trades.

Do you understand how front running helps the front runner and hurts the large volume trader? I think if you did, you would realize that Robinhood has no reason to do it.

Re: Wall Street’s ‘Private Rooms’

#178

Post by JedMartin »

superzamp wrote: post #158
whatshisface wrote: post #109

Earlier quoted context omitted.

Instead of demanding that your counterparty be uninformed, why not do a market open/close auction every minute?

Attempts at doing this are effectively already existing, the IEX [1] exchange being an example, albeit on a less ambitious scale than your idea: > It's a simple technology: 38 miles of coiled cable that incoming orders and messages must traverse before arriving at the exchange’s matching engine. This physical distance results in a 350-microsecond delay, giving the exchange time to take in market data from other venue…

IntelligentCross Midpoint (a darkpool) is a better example, since it actually does matching periodically every couple of milliseconds [1]. IEX just introduces additional latency for everyone.

[1] https://www.imperativex.com/products

Re: Wall Street’s ‘Private Rooms’

#179

Post by seabird »

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…

Nobody is frontrunning an order of 3 shares of SPY.

Re: Wall Street’s ‘Private Rooms’

#180

Post by Invictus0 »

darod wrote: post #175

Many comments are saying that these rooms have been created to give fund managers the ability to execute large trades while keeping the price similar or close to what is available on the open market. I guess my question is why should they should be allowed to be protected from this type of risk? If they were not protected from this large type of risk, then maybe we would have more competition in the large fund manage…

You're asking why two people should be able to trade with each other in private?
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