The Threat from Dark Pools

Business, Economics, Europe, Markets, US

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It might seem a little melodramatic (and it’s a wonderfully melodramatic name), but what kind of threat do dark pools – and other off-exchange trading mechanisms – present to all our livelihoods?

You can see that the World Federation of Exchanges might have a financial motive in making their complaint to the G20 over the threat these mechanisms represent to their “macro-economic role”.

But after the role that the shadow banking system played in the financial crisis you have to be worried.

The $64,000 dollar question has to be how you regulate dark pools etc.

And for the sake of melodrama: Unseen forces, unaccountable and anonymous, might start determining all our livelihoods.

Sudden and entirely unpredictable shifts in global commodity markets could push countries into financial ruin and even wars.

At least in the case of the exchanges, because pricing is transparent, you can challenge the logic of say the futures price of oil being way out of step with supply and demand fundamentals.

But the problem with these dark pools etc is that you won’t have a clue on what might happen until it hits you.


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