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  • Rail_thumb_devine

    Defining Crowdsourcing (It May Not Be What You Think)

    “Crowdsourcing” is one of the hottest buzzwords in business, but what exactly is it? According to Adam Devine, VP, product marketing and strategic partnerships, WorkFusion, the term is often ...
     
  • Rail_thumb_aitken

    Has Chi-X 2 Hurt the Quality of the Canadian Equities Marketplace?

    The relative merits of equity market fragmentation remains a contentious issue for market participants and regulators. While competition reduces transaction costs and encouraging innovation, too much ...
     
  • Rail_thumb_boardman

    Adapting to New Dark Pool Rules

    European regulators are set to finalize rules for regulating dark pools. Rob Boardman, European chief executive of broker ITG, explains to the FT’s Philip Stafford how the market will adapt to the likely ...
     
 

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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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