Financial Analysts Journal November/December 2014 Volume 70 Issue 6
Dark Trading and Equity Market Quality
Off-exchange trading in equity markets, including broker/dealer internalization and dark pools, has grown in recent years. An examination of the relationship between dark trading and market quality suggests that as dark trading increases, the marginal benefit from it declines. Beyond a certain threshold, increases in dark trading may be associated with deteriorating market quality. The level of this threshold is related to the type of dark trading and the market capitalization of the stock.
About the Author(s)
Rhodri Preece is Senior Head, Research for CFA Institute and is responsible for leading the organization’s global research activities and publications, managing the research staff and collaborating with leading investment practitioners and academics. CFA Institute produces the highest-calibre research on issues and topics most relevant to the investment industry, including rigorous in-depth research, forward-looking thought leadership content, applied investment insights, and commentary on trending investment topics.
Rhodri previously served as head of capital markets policy EMEA at CFA Institute, where he was responsible for leading capital markets policy activities in the Europe, Middle East and Africa region, including content development and policy engagement.
Mr Preece is a current member of the PRI Academic Network Advisory Committee, and a former member (2014-2018) of the Group of Economic Advisers of the European Securities and Markets Authority (ESMA) Committee on Economic and Markets Analysis.
Prior to joining CFA Institute, Mr. Preece was a manager at PricewaterhouseCoopers LLP in the investment funds group (2002-2008). He has a BSc and a MSc in Economics and is a CFA charterholder since 2006.
Sviatoslav Rosov, PhD, CFA, is director, capital markets policy, EMEA, at CFA Institute. He is responsible for developing research projects, policy papers, articles, and regulatory consultations that advance CFA Institute policy positions, focusing on market structure and wider financial market integrity issues.