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Dark Pools and High Frequency Trading For Dummies von Vaananen, Jay (eBook)

  • Erscheinungsdatum: 18.12.2014
  • Verlag: For Dummies
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Dark Pools and High Frequency Trading For Dummies

A plain English guide to high frequency trading and off-exchange trading practices In Dark Pools & High Frequency Trading For Dummies , senior private banker Jukka Vaananen has created an indispensable and friendly guide to what really goes on inside dark pools, what rewards you can reap as an investor and how wider stock markets and pricing may be affected by dark pools. Written with the classic For Dummies style that has become a hallmark of the brand, Vaananen makes this complex material easy to understand with an insider's look into the topic. The book takes a detailed look at the pros and the cons of trading in dark pools, and how this type of trading differs from more traditional routes. It also examines how dark pools are currently regulated, and how the regulatory landscape may be changing. Learn what types of dark pools exist, and how a typical transaction works Discover the rules and regulations for dark pools, and some of the downsides to trading Explore how dark pools can benefit investors and banks, and who can trade in them Recognize the ins and outs of automated and high frequency trading
Because dark pools allow companies to trade stocks anonymously and away from the public exchange, they are not subject to the peaks and troughs of the stock market, and have only recently begun to take off in a big way. Written with investors and finance students in mind, Dark Pools & High Frequency Trading For Dummies is the ultimate reference guide for anyone looking to understand dark pools and dark liquidity, including the different order types and key HFT strategies. Jay Vaananen is a senior private banker with many years of experience advising clients in their investments across all asset classes. He is also a popular university lecturer and regular commentator in all matters regarding banking, finance and investing.


    Format: ePUB
    Kopierschutz: AdobeDRM
    Seitenzahl: 240
    Erscheinungsdatum: 18.12.2014
    Sprache: Englisch
    ISBN: 9781118879306
    Verlag: For Dummies
    Größe: 1361 kBytes
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Dark Pools and High Frequency Trading For Dummies

Chapter 1
Focusing on Dark Pools and High Frequency Trading, Just the Basics

In This Chapter

Looking at what makes a dark pool

Defining high frequency trading

Naming the cast of characters

Identifying the order types

Eyeing regulation

They're the hot topic in financial markets now. You can't open a newspaper or click on financial news without coming up against the terms dark pools or high frequency trading (HFT). It's all happening in the world of dark pools - lawsuits, scandals and accusations of the market being rigged. One thing is certain: all the banks and brokers are involved in one way or another with dark pools. But whenever you mention dark pools, you also have to consider the subject of HFT. One came about because of the other, and then they came full circle and now both operate in the same environments.

Like the name implies, dark pools are dark and secretive and the banks, brokers and institutions that operate the dark pools would prefer them to remain that way. High frequency traders are no different; they're even more secretive about their activities and would've liked nothing more than to have stayed hidden in the shadows, buying and selling stocks in milliseconds and making money.

The world has changed, though, and now there's no hiding in the dark anymore. The light is being shone on dark pools and HFT. This chapter serves as your jumping-off point into that world.

HFT, dark pools and algorithms can be found anywhere where there's a working stock exchange. There's no place to hide from them if you want to invest in the markets. The United States remains the main market by far. With more than ten stock exchanges and dozens of dark pools, the venues are so fragmented that the US market remains the best type of market for high frequency traders to operate in. When it comes to changes and trends in the high frequency and dark pool market, look to the United States first - the rest of the world is sure to follow.
Defining Dark Pools: Why They're an Investment Option

Dark pools have been around in one form or another since organised stock exchanges began. In their simplest form they're a venue other than the stock exchange where stocks are traded. A stock market is one big, ongoing auction with investors and traders bidding and offering shares at different prices. Stock markets display their orders in an order book for all to see. When investors agree on a price, a trade happens and the process of agreeing on a price and making a trade repeats itself and continues all through the trading day as long as the stock exchange is open. But other times an investor may want to do a trade outside of an exchange.

That's where a dark pool comes in. A dark pool is a private venue where investors can exchange large amounts of stock without tipping the market to their intentions and, most importantly, without overly moving the market price. The common attributes of a dark pool are as follows. You can also refer to Chapter 2 for more detailed information about dark pools.

Little transparency of trade execution: The broker, bank or whatever entity that is running a dark pool has a huge responsibility of discretion towards its clients to keep the information private and to make sure that information about a large order doesn't leak. Trying to find buyers without letting anyone know there are sellers and vice versa is challenging.
Trades executed within the spread: The spread is the price difference on a stock exchange between a bid (a price someone is willing to buy a stock at) and an offer (a price someone is willing to sell at). A dark pool will benchmark the price it trades at to the prices on a stock exchange with the aim of doing the trade at a slightly better price for both the buyer and the se

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