Here are the previous pieces in this series;
Dark Pools I: A Primer to Darkness
Dark Pools II: Do they Exist? A TLDR inside.
Dark Pools III: Specific types of Dark Pools
Dark Pools IV: History and Possible Origin Story
Dark Pools V: addressing Conspiracies
Look Guy, I’m not your Pal, nor am I here to tell you morals and stuff, because you’ll definitely want none of mine.
So Good and Evil aside, we can view Dark Pools like a tool.
Dark Pools serve a purpose, it just so happens that the egregious malicious abuse of dark pools happens to go unchecked and unmitigated. It’s like banning hunting rifles that are used to hunt because Shooting humans and stuff is bad m’kay. So Dark Pools are much like Guns or Rush Limbaugh, simply misunderstood.
Simply, there is no Morality to a Dark Pool, it’s simply a tool.
And like any tool, it serves a purpose, and does things, or *Checks Notes* provide liquidity?
Dark Pools provide Liquidity and also allow fragmenting orders through the markets, thereby not allowing any large block trade to get poached in large volumes from a large competitor. Which is great for large block traders like banks and billionaires.
This is the safe answer to why Dark Pools need to exist, for the security of large block trades and to provide liquidity. . .
But I can vouch for the profit making potential of Dark Pools.
You could technically rig the market in a way that redirects the ‘cash flow’ into ‘dark pools’ and through lever-aging the controls on the ‘Water Dam’ leading to the Lit Pools, you could directly control liquidity and price.
Which means a lot of power.
Because Liquidity is akin to volume, and trade volume is king, and that means liquidity control helps to indirectly manipulate price and price action.
I mean, the purpose of SLPs were to provide liquidity in efforts to offer price stability. Which can also be viewed as Sanctioned Market Manipulation. Basically SLPs provide price control, preventing large fluctuations by pegging the value to a random price. That Random price just happens to be set to wherever someone wants it to be.
And Price control is literally market manipulation. . .
How ever there is a sort of downside with Dark Pool usage. Over using Dark Pools can lead to;
A fragmentation of the markets.
Fragmentation of the Markets, ‘Who turned off the lights?’
Just like how VPN tunnels and other Internet shits drill Warp-holes in our ISPs Structures and networks, Dark Pools also run like the underground railroad, by transferring shares away from the prying eyes of other institutions.
Here’s a Time-Space-Relativity Worm Hole to help explain Dark Pools because it’s a simplistic model that even simpletons can understand. Surely you’re smarter than a simpleton, so You’ll understand this real easy;
Trading on a lit pool would seem ‘old school’ and kind of retarded with having your orders be routed publicly. That’s like telegraphing your moves, totally a retarded thing. Unless you’re doing some game theory and psychologically playing some chumps into reading too deeply into a bad public move for you to make a play off of their play. But you’re probably not a Nathan Rothschild, so calm your tits.
Point is Dark Pools have benefits and eventually people will start resorting and routing through them like it’s normal. Which, I mean, people already are. Most (or a Good Chunk) of the Markets is traded through Dark Pools.
Eventually the benefits of Dark Pools outweigh the actual cost of using/routing through Dark Pools. So more Market Makers, exchanges, and Prime Brokers will offer more exclusive ‘Dark Pools’.
Everyone starts making their own Dark Pool trade venue, because they know they can get a quick buck by offering their trading systems and services to investards. To which the Dark Pool owner might get a small fee or ‘toll’ for taking this back door route, while also (more importantly) getting sweet sweet juicy trade data.
So of course everyone is going to create their own Dark Pools and start shilling to investards;
And when they have your trade data, they can use that to play against you, or predict the market, or sell that data to someone else that thinks they can use that data, or [Insert Reason Here].
Whatever the point is, Data is much like a Degenerate Derivative, people want it, and people speculate the worth of the data and trade it to others who also speculate that the data is worth it.
A bunch of speculatory data circle jerks, and that’s the secondary or tertiary market you create when you extract valuable data from your Dark Pool in the Information age.
In a way, with everyone creating a whole bunch of Dark Pools, this circumvents the actual trade flow and public data of the lit exchanges. It’s like everyone is using spies or submarines, and now no-one knows shit.
Which also means that regulatory practices will lag behind the Dark Pool use too, so that’s another benefit of using Dark Pools.
The question then becomes;
‘Who turned off the lights?’
This is what markets would look like if we had no Dark Pools, at some point the trades would have a bit of light shined on them to show everyone what’s going on.
Much like Crypto’s Live action Transaction map courtesy of Whale-alert.io;
We can see the external use of any security, thereby ensuring a free and fair market. While the internals of a market or exchange itself, might need a little more transparency. But overall, Crypto is a sort of good comparison for a lit exchange, it doesn’t necessarily ‘solve trust’ (as the coin cults preach) but it’s a nice reference.
This is what markets look like when we use only Dark Pools;
More people are trading through Dark Pools, which gets people to make and build better Dark Pools, which gets more people to trade through Dark Pools, and now you’ve got a circle jerk of More Dark Pools.
All of which, trade differently and aren’t always reflected in Public Data or NBBO or [Insert Classical-Economic Market Mechanic here]. Now all of the Stock Market becomes akin to a murky mess of Night Markets and Black Markets exchanging pilfered and fenced goods, except with Dark Pools. With Each Dark Pool offering a different suite of resources and possibly a different price.
This advent in the rise of separated Dark Pools creates the fragmentation of the Markets creating a sort of Decentralization of the Lit Exchange and resources.
So, in a way, before Crypto, Dark Pools technically speaking,
(Of atleast the Stock Equities market. So, uh, congratz?)
Lmayo. Dark Pools Decentralizing finance in support of the ones who owned the centralized regimes is hilarious. If you need me to explain why, then we can’t be friends.
Dark Pools are kind of like crypto, but worse, because Public pension funds and other supposedly (and marketed) ‘safe’ investments are trading in the very same markets that Dark Pools operate under. Which isn’t a problem, unless someone with egregious abuse of Dark Pools get too greedy, overstep, and is over exposed resulting in another ‘black swan’ event. Remember how they did people’s retirement accounts in 2008? Surely that won’t happen ‘Again’.
Consolidation of the Fragments;
All good things, like war and chaos, must come to an end. Order or something yin and yang.
Eventually the Dark Pools will no longer be fragmented. Instead the tiny fragments of dark will consolidate into a large Darkness, a large Dark Pool. . . I mean, that’s the natural progression of things.
Anyways, what naturally happens when there are competitions of markets and other factors or businesses fighting for a Lion’s Share of the market, is that a race to a final destination starts. It’s natural like Nature.
A Race to start a natural monopoly. Totally Natural.
And boy oh boy, do we sure have at least one Monopoly of/on Dark Pools. We probably have at least two, but the smaller trade venues don’t fight the big dogs, so I’m going with a duopoly in the Dark Pools. But semantics, for the sake of this, I’m going to assume a monopoly. It’s only natural.
Yes, so the lightly Regulated Self-reported Dark Pools become a natural monopoly that control the Stock Markets, basically.
So the fragments come together to create Megazord, or whatever.
Now the Tool of the Dark Pools is a large Leverage arm that controls the US Stock Markets, which is one of the most powerful markets and one of the most ‘trusted’ markets. Meaning there is a lot of political power and clout using and leveraging this Financial Tool called a Dark Pool.
But I’m not here to talk about Politics, I’m Anti-Politics so I don’t care who has the super weapon called the Monopoly Dark Pool.
The only thing I need you to take away is, that there is a superweapon called the Monopoly Dark Pool. This is currently the stage that we are progressing to or already in.
That’s why Free markets are an illusion, you can’t have a free market with regulation, and you definitely can’t have it be free without regulation. Lmao.
Damned if ya do, damned if ya don’t.
So Dark Pools are like Tools, like Nuclear Power.
And Tools are like Keys, they help unlock the infinite future potentialities.
Here’s a Buddhist Proverb;
“You hold a Key, one that Opens the gates of Heaven, and also the Gates of Hell”
Remember Nuclear power can bring forth a Fuck-Ton of Energy, to help the world, or Blow shit up.
Dark Pools, can do the same, it can make the world of finance better, or it becomes a complete shit show.
What you decide to do with the tools you have, can pave the path for the future.
Do you use the tool for good or evil?
I’m the kind of
guy asshole that says the Gates of Heaven and the Gates of Hell are the same Gates.
A Scam, don’t use the key, it’s promethean tech and witchcraft obviously.
LMAO, there really is No Safe Bets,
*Not Valid Financial, Legal, Life, or Any Advice