Some posts talk about how price movement happens and that orders are supposedly routed to "lit" exchanges versus some orders are routed to "darkpools". The argument being that the orders that go through the lit exchange will move the price but if they go through the dark pools the prices does not change.
how much of this is just nonsense and what is the truth about how order routing works ? Why does the price move in one case and does not in the other?
And what on earth are "lit" exchanges and darkpools. Sounds like words from a spy novel
Understanding of “lit” exchange and darkpools?
byu/Narrow_City1180 inoptions
Posted by Narrow_City1180
2 Comments
Gary Gensler said this himself.
https://youtu.be/t6AlRXJ90jU?si=wUKSPhse5PDbyvRU
I don’t fully understand what Dark Pools are but I definitely understand what a Lit Exchange is.
I’ve worked on a trading desk, and simply put, dark pools are typically seen as private transactions (think JPM selling UBS their whole inventory of a stock, this order is too large to enter the market normally and by doing so would let everyone else know that JPM is bearish the stock). Dark pools allow large institutions to sell funds to each other without significantly moving the market, usually this is used for block orders over 10,000 contracts or orders that are ‘Not Held’
Dark pools are still visible but only after a transaction goes through, it still has to legally be on the tape
I’m assuming you mean dark pools in the traditional sense, but if I’m getting mixed up lmk