Imagine stock for some company XYZ opened at $100 and then traded each hour 1000 shares with increase of $1 each hour: 1000 shares sold at 10am for $100/share, then 1000 shares sold at 11am for $101/share and so on. All daily transactions are:

1000 @ $100 (10:00am)
1000 @ $101 (11:00am)
1000 @ $102 (12:00pm)
1000 @ $103 ( 1:00pm)
1000 @ $104 ( 2:00pm)
1000 @ $105 ( 3:00pm)
1000 @ $106 ( 4:00pm)

It's obvious how that would look on hourly chart: constant volume and price steadily increases each hour. Also, assume that when there were no trades bid-ask spread was always +/- 1$, that is at 1:30pm bid/ask was 1000 shares on each side with $102 bid and $104 ask. Volume for the day is 7000 shares with $100 open, $106 close and average price for the day is $103. That's what happened on public exchange. Assume that the same XYZ stock was traded once at a dark pool in a single transaction of 100K shares at exactly 1:30pm at $100/share.


  • is it even possible that in dark pool a transaction would be executed at lower price than current bid/ask on public exchanges? Eg. if somebody placed 100K shares for sale at $100/share at 1:30pm would that be matched by current bid of $102 on public exchange, or the buy/sell books aren't connected in any way and dark pools may trade at price unrelated to current public price?

  • are dark pool trades related to L3 hidden orders or it's totally different unrelated thing?

  • all traders watching XYZ would see 1000 shares traded each hour and the price traded. What will they see on the tape at 1:30pm when 100K block gets executed at a dark pool at $100/share? Will everybody see price move down by $2 on huge volume or nobody will see anything until end of day? That is, will this trade be visible to all, will the price be visible, will the time of execution be visible and if it will be visible, when will it be?

As I understand from this answer by @dcasewell, consolidated volume is tracked/gets reported to DTC, if so, when and how will we see that volume on charts?

1 Answer 1


Let's talk about printing to the tape first.

Dark pool transactions, like all OTC listed equity transactions, have to be reported to the tape in a timely fashion through a Trade Reporting Facility. Or as Reuters puts it,

Under SEC rules, every stock transaction must be reported to a consolidated data feed, whether it occurs on an exchange, like the Nasdaq or Intercontinental Exchange Inc’s (ICE.N) New York Stock Exchange (NYSE), or in a dark pool. Off-exchange trades are reported through Trade Reporting Facilities (TRFs) run by Nasdaq and NYSE in conjunction with FINRA.

The FAQ is pretty good and says that dark pool transactions have to be printed within 10 seconds.

Generally, members must submit tape reports of transactions in NMS stocks and OTC Equity Securities (including non-exchange listed foreign securities, ADRs, Canadian issues and direct participation program (DPP) securities) as soon as practicable, but no later than 10 seconds, following trade execution during the hours that the FINRA Facility to which the member is reporting is open.

Now for price - OTC transactions in dark pools like on-exchange trades are governed by Reg NMS, which prohibits trade throughs, which basically means you have to satisfy the best lit top of book. So for a 100k share order in the dark pool, let's say Arca has the best price for 1000 shares, you'd have to do 1000 share on Arca to avoid trading through the market, which would print that to the tape, then 99k shares in your dark pool. Here's an interesting article about the problems this causes for institutional investors that want to get a lot of stock done at once.

FINRA also has a bit about how dark pools interact with lit markets.

One concern is that when large orders take place off traditional exchanges, the price of shares simultaneously traded on the open market may not accurately reflect market supply and demand. So, as noted above, these dark pools may not be contributing to price discovery in the same way that traditional exchanges contribute.

At the same time, because dark pools necessarily rely on public prices as a benchmark for their trades, and generally under the SEC’s order protection rule must execute trades at prices at least as good as the best that are publicly available, dark pools benefit from the pre-trade pricing information provided by those exchanges.

Hidden orders are a feature of limit order books on exchanges, doesn't really fit into your scenario.

  • Thanks! Can you please clarify what you mean by "Hidden orders are a feature of limit order books on exchanges, doesn't really fit into your scenario."? Are you referring to my question if darkpool and L3 hidden orders are the same thing?
    – Pavel P
    Jan 21, 2019 at 1:12
  • 1
    @Pavel yeah, a hidden order usually is sitting on an exchange's limit order book but isn't displayed to the exchange participants. A dark pool is sort of a giant set of hidden orders, I suppose.
    – dsolimano
    Jan 22, 2019 at 22:57

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