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Wall Street’s ‘Private Rooms’

bloomberg.com

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Re: Wall Street’s ‘Private Rooms’

#31

Post by oangemangut »

reverendsteveii wrote: post #23
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…

In the case of Dark Pools, it would actually be the crier saying "a lot 10x the size of what I'm auctioning just traded somewhere else where none of you lot can trade for xx price". So after they say that you actually do know the price that they bought the item(s). This is since the dark pools have requirements to report to the trade tapes their trades in fairly similar latency to the exchanges themselves.

EDIT: The rules also dictate the allowed prices the dark pools trade at. They have to be within the national BBO, they can't just trade at whatever price they want. So the public auction is actually helping them find the prices, without their pre-trade information affecting the price before execution.

Re: Wall Street’s ‘Private Rooms’

#32

Post by gruez »

reverendsteveii wrote: post #23
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…

>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.

So if I have a RTX 4090 to sell (a very sought after commodity these days), and I sell it to my buddy rather than listing it on ebay, I'm doing market "manipulation"?

Re: Wall Street’s ‘Private Rooms’

#33

Post by JKCalhoun »

ikmckenz wrote: post #21
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…

> 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.

Really? Isn't knowing that an extremely large trade is about to take place insider information?

Re: Wall Street’s ‘Private Rooms’

#34

Post by gruez »

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.

The "insider" in "insider trading" refers to trading on privileged nonpublic information, not arranging the trades in a private venue.

Re: Wall Street’s ‘Private Rooms’

#35

Post by jandrese »

dheera wrote: post #14
rkagerer wrote: post #11

Earlier quoted context omitted.

If that's the case, couldn't the providers who operate the dark rooms (like OpenChronos) use their own realtime data to do so? Are there any who do that today? (i.e. monetized market surveillance). If so, does it run afoul of regulations?

I don't know, honestly. I would imagine it to be illegal to trade on that data before it's released to publicly-available trade streams. I'm of the opinion that a huge amount of manipulation happens and the SEC either turns a blind eye to it or the SEC goes after easier fish that have worse lawyers to get their income.

> I would imagine it to be illegal to trade on that data before it's released to publicly-available trade streams.

But what would be the penalty if you are caught? A few hundred million dollar fine? Absolute peanuts to any of the firms operating these pools. Of course there is corruption in the system, it is set up to facilitate corruption. Without corruption there would be little reason for these to even exist.

Re: Wall Street’s ‘Private Rooms’

#36

Post by markus_zhang »

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…

109%, but of course such legislations won't get passed.

Re: Wall Street’s ‘Private Rooms’

#37

Post by oangemangut »

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.

Even in dark pools the trades have to happen within the NBBO, they can't just trade at whatever price they want.

Re: Wall Street’s ‘Private Rooms’

#38

Post by JKCalhoun »

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…

It stands to reason that if the buyer/seller are seeking private rooms there is something unfavorable for them about "lit" trading. That alone should raise red flags.

Re: Wall Street’s ‘Private Rooms’

#39

Post by wesapien »

gruez wrote: post #32
reverendsteveii wrote: post #23

Earlier quoted context omitted.

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…

>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. So if I have a RTX 4090 to sell (a very sought after commodity these days), and I sell it to my buddy rather than listing it on ebay, I'm doing market "manipulation"?

Depends on the volume

Re: Wall Street’s ‘Private Rooms’

#40

Post by tedunangst »

JKCalhoun wrote: post #33
ikmckenz wrote: post #21

Earlier quoted context omitted.

> 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.

Really? Isn't knowing that an extremely large trade is about to take place insider information?

That is only insider information for the person making the trade.
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