They are not dimly lit VIP saunas that serve clever cocktails, as the name might suggest. Often misunderstood, there is no doubt that Dark Pools offer significant advantages to their participants. Even though they account for more than 40% of US Equities trading volume, for most beginner traders, these trading centers remain shrouded in mystery.
Let's unpack what Dark Pools are, why traders should care, and what benefits they may hold for you.
What Are They?
Simply put, Dark Pools are privately operated exchanges, offering significant ECN fee savings. The word Dark is only implying that there is no visible public order book or quotes. Originally devised in the 1980s to facilitate trading of large blocks of shares without impacting the market, their use has grown and evolved significantly.
Why Should I Care?
Consider the following scenario: you wish to sell a large position in an illiquid stock, and you send the entire order to an exchange. Traders see your massive liquidity block on the book, news gets out that someone is selling, the market reacts against you and everyone else starts repricing lower.
Now consider an alternative: you send this position to a Dark Pool. It doesn’t show up in any order books. No news, no market reactions, no price deterioration, minimal slippage. The defining benefit of Dark Pools is just that - they are dark.
- Significantly reduced or non-existent market impact from large orders
- Can get filled at better prices than exchanges! But, not outside the NBBO.
- Lower fees than Exchanges
- Additional source of liquidity, beyond lit exchanges, driving greater market efficiency
- Highly restricted access, typically only available to institutional participants
There are three varieties of Dark Pools to be aware of:
Broker-Dealer Owned: run by large broker-dealers for use by clients and their own traders (e.g. Goldman Sachs Sigma X, Credit Suisse CrossFinder)
Agency Broker or Exchange: operating as agents and run by exchanges or agencies, these pools derive prices from exchanges, but orders on them remain dark (e.g. Instinet, BATS)
Electronic Market Makers: run by independent firms that function as principals to their own accounts (e.g. Knight and Getco)
For many strategies, it is clear that Dark Pools can offer significant benefits, but access to them remains highly exclusive. Fortunately, ZIMTRA is specifically focused on equipping professional traders with every possible weapon in the arsenal.
ZIMTRA traders enjoy unparalleled Dark Pool access, with over 100 routes that access dark liquidity, reaching nearly all dark pools currently in operation.
Bonus: For the extra curious, Scott Patterson's "Dark Pools: The Rise of the Machine Traders and the Rigging of the U.S. Stock" is a definitive resource on this topic. Happy Trading!
Markets are driven by news and profitability is determined by your reaction time to breaking news. One common characteristic found amongst the best professional traders is their ability to receive news rapidly and to interpret it efficiently.
Using multiple sources for news is an important way to ensure that you are getting the most accurate and timely information. In this article, we will review a number of sources where you can get the latest information, with tips on how to best utilize the tools available to you.
Platform Specific News Feeds
News sources, streams and videos are sometimes available for free online, some require a subscription by the trader and some are available inside the News Windows of the trading platforms used by Zimtra’s traders, sometimes at a small fee charged by the platform.
Contact the Zimtra support team to explain the options and costs and enable your account for the News Windows available in your platform.
The Economic and Earnings Calendar
This is an important tool used by traders because it provides a schedule for the economic events and earnings of companies and governments.
Calendars are very accurate and customizable, widely available online, both from listing exchanges, and from all the major financial news websites.
To use the calendar well, it is recommended that you do a few things:
- Always check the calendar before the trading day; this will help identify which events to expect today.
- Prepare. Look at the trends in the specific data. For example, if you are expecting employment numbers, you should expand the chart to show the recent trends in the chart, to be able to form your own opinion on how to quickly interpret the number once it is released, and how to react in either scenario.
- Keep the calendar clean and organized by removing unnecessary data. You can do this by removing the countries that you don’t follow and the economic data that does not interest you.
Watch the News
The good thing about the calendar is that it tells you what to expect and when, but - unforeseen and exceptional events greatly impact the market, and are not predicted by calendars. Watching and listening to financial media is the best way to passively be notified about breaking news and in-depth analysis on major dealings. Two of the best sources of news are Bloomberg and CNBC. If you don’t have the channels at your trade station, you can stream them online.
Depending on your strategy, it might be important to keep on top of local news. Before the news makes global headlines, it is first reported by the local news agencies. This will put you ahead of the curve as most investors rarely get this news since they depend on large news agencies like Bloomberg and Reuters.
Investor Relations News
This is an important source of news which is essential to stock traders. In the United States, companies are required to share significant news with their shareholders. The companies do this using their Investor Relations (IR) department.
Companies often make presentations to analysts and shareholders. They often stream these sessions, and you can participate and ask questions if need be. You can also email your questions directly to the IR department.
Company Corporate Actions, announcements, and other notable notices that can move prices significantly are all released on company IR boards as soon as they are made public.
Companies are followed by different analysts who research and provide information on them to their clients. In many cases, these analysts have relationships within their organizations.
When they receive information, analysts publish their analysis in research reports, and occasionally share some of it with their social media followers. As a trader, you should carefully follow analysts that cover the companies you are interested in.
Finally, social media can be a useful source to get breaking news and engage with fellow traders. Social media platforms like StockTwits, Twitter, and Facebook are used by traders to communicate their ideas and insights. In recent years, “Meme” trading and social driven trading events have risen in prominence; traditional market trading “experts” have often ignored these trends at their own peril, and it is now widely recognized that this theme is here to stay.
Financial Stock Market News Sources & Feeds Resources
- Yahoo Finance: Free news aggregation site
- Bloomberg: Best finance TV channel
- MarketWatch: Free financial news website
- Wall Street Journal: Digital & print investor news
- The Economist: Weekly financial newspaper
- CNBC Markets: Stock market news channel
- CNN Money: Free news website
- Financial Times: Respected financial newspaper
- Forbes: Engaging Investing & Business News
- Barrons: Investing and retirement news
- Traders Magazine: Stocks & Commodities magazine
- MetaStock Xenith: Real-time global financial news app
- Benzinga Pro: Real-time stock news for traders
Zimtra has an exclusive partnership with T3 Trading. Insert the T3 training section and links here.