What is a dark pool?

"Dark pool" is a method or platform within a trading system with which large institutional investors, such as investment funds and hedge funds, can trade substantial orders with a certain degree of anonymity. These trading platforms are called 'dark' because the transactions that take place there are not shown in public order books, as is the case with traditional stock exchanges.

Dark pools have little transparency and are only accessible to large parties, meaning there is no level playing field for all market participants. These platforms are often managed by large banks and other financial institutions, and are designed to process transactions efficiently and discreetly.

Although dark pools offer certain advantages, such as limiting market impact on large transactions, they are also controversial because of the lack of transparency and the possible risks for smaller investors. Trading via dark pools has been under increased scrutiny since the Wall Street crash in May 2010.