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  • Rail_thumb_bogle

    HFT Here to Stay: Vanguard's Jack Bogle

    Vanguard founder Jack Bogle says high-frequency trading has very little impact on long-term investing in equities and that the markets are better with HFT than without it. He discusses HFT's strengths and ...
     
  • Rail_thumb_avadhut

    Sell Side’s Risk Pains Are Buy Side’s Gains

    As regulatory capital charges make it more expensive for sell-side banks to hold certain risk, they are anxious to remove that risk from their balance sheets. For buy-side firms looking for higher returns in the ...
     
  • Rail_thumb_merrin

    Is the Market Rigged? Retail Investors Think So: Merrin

    Whether the market is rigged is not the important question, says Liquidnet CEO Seth Merrin, who notes that the market structure debate is old news within the industry. The real question, he adds, is: Do retail ...
     
 

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20 November 2012

Dark Pools, Internalization, and Equity Market Quality

Off-exchange trading in equity markets, including broker/dealer internalization and dark pools in which prices are not displayed prior to execution, has grown significantly in recent years. An examination of the relationship between such “dark” trading and market quality shows that increases in dark pool activity and internalization are initially associated with declining bid–offer spreads and increasing depth. But when a majority of trading occurs in undisplayed venues, the benefits of competition are eroded and market quality deteriorates. Public policy considerations for market integrity are addressed on the basis of these findings.


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