One hedge fund manager says the only thing stopping him gouging clients of dark pools is his lawyer and his scruples.
“It’s free money,” said Richard Gates, a portfolio chief at money manager TFS Capital. “It’s a neat inefficiency in the marketplace, and dark pools are growing tremendously in size.”
Dark pools are electronic venues where funds can buy and sell blocks of shares without publishing bids or offers. Technically, they aren’t exchanges, but they work in the same fashion, matching buyers and sellers. The funds value the anonymity of the dark pools and the fact that trades aren’t public until after their execution. That way, their orders do not push the price of the stock away from them, at least in theory.
http://blogs.wsj.com/marketbeat/2008/12/26/gaming-in-dark-pools/