I have heard of dark pools but never went down the rabbit hole in terms of understanding why they exist in the first place. The concept is quite unique and I have mixed feelings about it.

Given that the crypto industry builds its reputation on transparency and immutability, it seems counterintuitive to support something like the dark pool, however, the reasons behind it are legit - to some extent.

A dark pool is a privately organized financial forum or exchange for trading securities. Dark pools allow institutional investors to trade without exposure until after the trade has been executed and reported. Dark pools are a type of alternative trading system (ATS) that give certain investors the opportunity to place large orders and make trades without publicly revealing their intentions during the search for a buyer or seller.

Dark Pools are privately owned exchanges designed to provide additional liquidity and anonymity for traders that bet big. And while there's nothing illegal with such practice, due to its private nature and lack of transparency, many are questioning the narrative and purpose of such pools.

Investment banks are the ones who actually invented/supported it in an attempt to allow their customers to opt-out without being noticed. It wouldn't be the first time businesses earned billions while knowingly providing misleading information to the investors.

For

Dark pools first appeared back in the 1980s when the SEC allowed brokers to transact large blocks of shares. The vital leverage such exchange provides is that institutional investors can make trades without being exposed to the public. It means that if some big company wants to sell for instance 10% of its holdings, and if other traders/investors seen such actions, the price fluctuations would be enormous, the price of an asset would fall down the hill.

In order to avoid price devaluation, such pools gained a lot of traction.

If you're asking who's behind such pools and who provides liquidity the answer is simple: investment banks.

Against.

And while I do understand the necessity, I think the lack of transparency inevitably leads to the dark ages of corruption and nepotism.

Although considered legal, dark pools are able to operate with little transparency. Those who have denounced HFT as an unfair advantage over other investors have also condemned the lack of transparency in dark pools, which can hide conflicts of interest. The Securities and Exchange Commission (SEC) has stepped up its scrutiny of dark pools over complaints of illegal front-running that occurs when institutional traders place their order in front of a customer’s order to capitalize on the uptick in share prices.

I'm just curious what'll happen with dark pools in the era of cryptocurrencies.

I mean we already have a lot of rug pulls, so...

Hope you learned something.

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