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Hi Chris,
Thanks for the video. A “broad-brush” summary – which probably misses a lot of the detail.
1. The video is glib. Just as CDO’s were not a problem – HFT is not and neither are “dark pools” trading up to 40% of company’s stock?
2. With the big boys always trying to trade earlier, buy lower and sell higher than the other traders – there is now another reason for individual traders to stay with high liquidity stocks.
3. Increasing volumes in the “dark pools” are likely to increase and exacerbate volatility especially during times of market fluctuations.
4. With the “too big to fail” approach of large financial institutions – then for all their trades should only be through registered exchanges.
Kind regards,
John
In Australia ASIC now requires dark pools to offer price improvement compared to the open market, so dark pools operate within the spread and cannot allow users to “buy lower and sell higher” than open market participants. What dark pools do provide is reduced brokerage and slippage for large transactions.
My main concern is that currently most data providers do report on ASX volume, when 10 to 40% of trades routinely now go through Chi-X, so the quality of volume data for determining trade opportunities is compromised.