RSM434H1 Lecture Notes - Lecture 2: Dark Liquidity
Document Summary
Client cares more about saving costs than trader. Order information may not be revealed to everyone. Don"t know if there is buyer or seller, who they are, how many traders there are in market, volume and liquidity. Different markets offer different pros and cons to different stakeholders. All orders, active and passive, are collected in one book that is viewable by all participants. crossing market where large buyers and sellers are matched, either directly or indirectly. Active and passive orders are hidden, either for entire market (dark pool) or specific orders on a lit market (dark orders) Each market has set of rules that specify how active orders are matched to passive orders (how order becomes a trade) Passive orders are ranked by different priorities that impacts likelihood of trade being filled: price priority. Passive order with better price trades before order with worse price ii. Active order is matched with passive orders from same broker: time priority.
