Into the light: dark pool trading and intraday market quality on the primary exchange

James Brugler ()
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James Brugler: Bank of England, Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH

No 545, Bank of England working papers from Bank of England

Abstract: This paper uses regulator-provided transaction data to investigate how trading in dark pools affects intraday market quality on the limit order book of the primary exchange for members of the FTSE 100 index. Using trading patterns from execution algorithms as instrumental variables, I show that dark trading leads to improved liquidity on the primary exchange, both in absolute terms and relative to trading on the limit order book. Although these relationships differ across stocks of different sizes, dark trading does not lead to worse market quality at the intraday level for either small or large stocks during the sample period.

Keywords: Dark pools; dark trading; market quality. (search for similar items in EconPapers)
JEL-codes: G10 G12 G14 G18 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2015-09-11
New Economics Papers: this item is included in nep-mst
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Citations: View citations in EconPapers (11)

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