This book examines the characteristics of equity trading and especially two relatively new
phenomena which are dark pools and flash trading. Over the last years these two terms became
more and more important in equity trading and today they are a real alternative to traditional
exchanges like the New York Stock Exchange or Deutsche Börse. But these new evolutions do not
only have advantages. Indeed there are concerns that beside the benefits like fast execution
times sophisticated techniques and less market impact these mechanisms can also burrow risks.
These risks are difficult to estimate with an evolution of these new platforms that was so
quick that one might have the impression that even regulators do not full yet understand what
might happen in the case of a next financial crisis. However with a market share of 15%-20% of
all trading activity in global equities and a jump of almost fivefold in the period of time
from January to October 2009 these new mechanisms cannot be ignored anymore. Therefore this
book explains in detail the functionality of dark pools and other current trading strategies.
All important factors like different market structures market liquidity aspects as well as
regulatory framework and technology facets will be reviewed. Further an outlook should be given
to the reader on how the evolution of dark pools & co. might continue in the coming years. With
dark pools and flash trading trading is now dominated by rapid-fire computer systems that
might create a more technically driven market rather than one based on fundamental forces. It
remains to see whether this evolution will continue.
