Ping pools are like ‘dark pools of liquidity’ on steroids
You probably don’t know what any of that means. Well, gather ‘round kids, ‘cause you’re gonna learn today.
Private exchange groups (or “dark pools”) that aren’t accessible to the general investing public have actually been around since the ‘80s as a way for big institutional investors to make large-scale trades without making a splash in the public market.
In recent years, these “VIP” investment groups have become incredibly commonplace: as of 2014, off-exchange trading made up 40% of all US stock trades, up from 16% in 2012.
Dark pools are a special type of investment group where all the participants are completely anonymous. Neither party involved in the trade knows the other’s identity, or even the reason the shares are being put up for sale.
It’s essentially a financial glory hole for large-scale trades that allows participants to sidestep exchange fees and public disclosures.
Which brings us to the ping pool
Where dark pools consist of multiple buyers and sellers, ping pools are completely controlled by a single company, which buys and sells chunks of stock for clients, all with the same privacy as a dark pool.
Sounds peachy. However, pool owners’ bird’s-eye view of multiple private trades leads many to wonder if they’re actually working on behalf of investors, or just using their knowledge to bet against trades and profit from brokers who pay to post their trades in the group.
Little less peachy…
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