Dark pool trading strategies, market quality and welfare

Buti, Sabrina; Rindi, Barbara; Werner, Ingrid M.

doi:10.1016/j.jfineco.2016.02.002

Cited by 97 publications

(49 citation statements)

References 59 publications

(66 reference statements)

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“…Fifth, trading in dark pools has been prevalent for quite a while but has changed form many times as risks and technologies evolve. For a theoretical analysis of this activity, see Buti, Rindi, and Werner (2017).…”

Section: Payment and Funding Systemsmentioning

confidence: 99%

The future of fintech

Das

2019

Financial Management

130

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This article describes the growing field of financial technology (fintech) and the different financial paradigms and technologies that support it. Fintech is primarily a disintermediation force where disruptive technologies are the drivers. This framework discusses 10 primary areas in fintech comprising a taxonomy, which categorizes research in the field and also proposes a pedagogical structure. Pitfalls of fintech are also analyzed. Overall, the great strides made in computing technology, mathematics, statistics, psychology, econometrics, linguistics, cryptography, big data, and computer interfaces have combined to create an explosion of fintechs.

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Section: Payment and Funding Systemsmentioning

confidence: 99%

The future of fintech

Das

2019

Financial Management

130

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“…17 The form of endogeneity that could be a concern is traders conditioning their order submission strategies (whether to send an order to the dark or to the lit market, which in turn determines the share of dark trading) on the price discovery characteristics. For example, Buti, Rindi, and Werner (2013) show that orders are more likely to be sent to a dark pool when liquidity is higher.…”

Section: Empirical Approachmentioning

confidence: 99%

Dark trading and price discovery

Comerton‐Forde

Putniņš

2015

Journal of Financial Economics

162

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a b s t r a c tRegulators globally are concerned that dark trading harms price discovery. We show that dark trades are less informed than lit trades. High levels of dark trading increase adverse selection risk on the lit exchange by increasing the concentration of informed traders. Using both high-and low-frequency measures of informational efficiency we find that low levels of non-block dark trading are benign or even beneficial for informational efficiency, but high levels are harmful. In contrast, we find no evidence that block trades in the dark impede price discovery.

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“…In terms of the aforementioned effects of the presence of the CN, whereas increases in the number of participating agents and welfare are generic, the narrowing of the spread does not seem to be so. For instance in Buti et al (2016), the presence of a DP results in a migration of liquidity and hence an increasing spread -an effect that cannot appear in our setting where all traders are liquidity takers. Contrastingly, Buti et al (2011), provide empirical evidence that high DP activity is associated with narrower spreads, but no causality is concluded.…”

Section: Related Literaturementioning

confidence: 77%

Trading Under Market Impact: Crossing Networks Interacting With Dealer Markets

2018

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We use a principal-agent model to analyze the structure of a book-driven dealer market when the dealer faces competition from a crossing network or dark pool. The agents are privately informed about their types (e.g. their portfolios), which is something that the dealer must take into account when engaging his counterparties. Instead of trading with the dealer, the agents may chose to trade in a crossing network.We show that the presence of such a network results in more types being serviced by the dealer and that, under certain conditions and due to reduced adverse selection effects, the book's spread shrinks. We allow for the pricing on the dealer market to determine the structure of the crossing network and show that the same conditions that lead to a reduction of the spread imply the existence of an equilibrium book/crossing network pair.

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Dark pool trading strategies, market quality and welfare

Cited by 97 publications

References 59 publications

The future of fintech

The future of fintech

Dark trading and price discovery

Trading Under Market Impact: Crossing Networks Interacting With Dealer Markets

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