Do dark pools distort stock prices?

Both experts and regulators have been zeroing in on high-speed traders. Through debates and studies, they’ve questioned whether high frequency trading and electronic markets are affecting investors. Read: IIROC studies impact of electronic trading But there may be a bigger threat out there, reports Reuters. It finds the proliferation of dark markets, or the increase […]

By Staff | April 7, 2014 | Last updated on April 7, 2014

1 min read

Both experts and regulators have been zeroing in on high-speed traders.

Through debates and studies, they’ve questioned whether high frequency trading and electronic markets are affecting investors.

Read: IIROC studies impact of electronic trading

But there may be a bigger threat out there, reports Reuters. It finds the proliferation of dark markets, or the increase of trading that’s happening outside of exchanges, may be more dangerous for your clients.

Read: Are your clients getting the best stock prices?

That’s because “so much trading is now happening away from exchanges that publicly quoted prices for stocks on exchanges may no longer properly reflect where the market is,” says Reuters. Though off-exchange trading can benefit investors, it adds, “it’s terrible for the broader market because it reduces price transparency.”

Read more on the potential dangers of dark pools.

Also check out:

Faceoff: High frequency trading

High-speed trading un-Canadian, says NY Times

Order rules may stifle retail trading

Can investors keep up with electronic markets?