TY - JOUR T1 - The Decline and Fall of Displayed Markets? <em>Highlighting Some Recent Trends in Non-displayed Liquidity Pools</em> JF - Trading SP - 54 LP - 62 VL - 2007 IS - 2 AU - Joseph Gawronski Y1 - 2007/09/21 UR - http://guides.pm-research.com/content/2007/2/54.abstract N2 - This article examines volume and other trends in non-displayed liquidity venues—so-called “dark pools”—through profiling some of the newer entrants that have been gaining traction over the past year. The reasons behind the success of these non-displayed venues are explored, which include in some cases significantly lower fees relative to incumbent players, investor bases that are supporting the venues with order flow, compatibility with algorithmic order flow, and the embracing of route-out strategies. In addition, the article notes that while the market share of dark pools as a class is on the rise, there are a number of realities that perhaps should temper some of the hype surrounding dark pools and tools related to them: (i) dark pool volume estimates of 15% of total average daily market volume put forth by some analysts are likely high by a factor of two because most of the dark pools double-count their volume, (ii) the rapid rise of some of the newer entrants has not merely been additive to the overall market share of dark pools, but in part has come at the expense of the veterans, cannibalizing their order flow, (iii) there are key factors about displayed markets which suggest that they are here to stay, although successful ones might incorporate dark pools and order types into their product offerings to leverage their inherent appeal to institutional investors, and (iv) dark pool aggregator algorithms must be utilized very carefully and their venue choices and execution results monitored closely because of their opaqueness and the conflict created by the fees they incur when they actually meet with success in dark pools. ER -