Dark Pools and Flash Trading: New trends in Equity Trading?

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Chapter 6 The structure of dark pools:
As mentioned earlier, a dark pool is a venue or mechanism containing anonymous, non-displayed trading liquidity that is available for execution. Having said this in the following the key mechanisms or rather the potential sources of dark liquidity will be explained. The main sources of dark liquidity are iceberg and hidden orders, alternative trading systems/multilateral trading facilities (including electronic limit order books and crossing networks) and broker desks.
The main point to keep in mind is that dark pools are not all equal, but differ in terms of business models and technologies. Clients can chose between those that offer full services versus those with discounted services, between those with full order management and those with execution only services, and so forth. Each platform provides clients with different levels of services in order to best match their requirements. But no matter what kind of business model a dark pool has, the main aspect is access to liquidity with a minimum of information leakage and price impact as well as capability for price improvement (Banks, 2010: 59).
Chapter 6.1 Exchange orders and brokers as sources of dark liquidity:
Exchange orders and specialist books are main potential sources of dark liquidity within the exchange structure.
In order to compete with the growing number of dark pools and other electronic players, most of the world s largest exchanges participate in the dark sector through iceberg and hidden orders. Although the concept of iceberg and hidden orders is not new, the importance of these order types has certainly grown in the last years. According to Euronext Paris, more than 40 % of all trading occurs via hidden orders (Euronext, 2012).
But exchanges do not only compete with dark platforms though iceberg and hidden orders. In fact they put effort into enhancing their specialist book capabilities in order to be competitive with the new

Katharina Niciejewska studied International Management at the Hamburg University of Applied Sciences and worked for several international banks in Germany and France in the past. Currently she is working in the energy sector. She is the author of 5 books on management, strategy and international business.