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Informed Trading in Dark Pools: Fair-Access Dark Venue vs. Restricted-Access Dark Venues

Author

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  • Nguyet Nguyen

    (The Brattle Group Limited, Level 15, 5 Martin Place, Sydney NSW, Australia)

Abstract

Prior empirical studies find that dark pools are, on average, associated with uninformed order flow. The “exemption from fair-access requirement†has been conjectured as a necessary condition for dark venues to segment uninformed order flow. This study presents direct evidence contrasting a dark venue that offers equal access to all market participants to other dark pools which have the ability to subjectively exclude order flow. Using the period leading up to surprise corporate earnings news, I document robust evidence of informed trading taking place in the fair access dark venue. I do not find such evidence in other dark venues.

Suggested Citation

  • Nguyet Nguyen, 2022. "Informed Trading in Dark Pools: Fair-Access Dark Venue vs. Restricted-Access Dark Venues," Quarterly Journal of Finance (QJF), World Scientific Publishing Co. Pte. Ltd., vol. 12(02), pages 1-37, June.
    • Handle: RePEc:wsi:qjfxxx:v:12:y:2022:i:02:n:s2010139222500033
    DOI: 10.1142/S2010139222500033
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    References listed on IDEAS

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    More about this item

    Keywords

    Dark trading; informed trading; fair-access requirement; order flow segmentation;
    All these keywords.

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading

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