TY - JOUR T1 - Cul de Sacs and Highways: <em>An Optical Tour of Dark Pool Trading Performance</em> JF - The Journal of Trading SP - 16 LP - 22 DO - 10.3905/JOT.2009.4.1.016 VL - 4 IS - 1 AU - Ian Domowitz AU - Ilya FInkelshteyn AU - Henry Yegerman Y1 - 2008/12/31 UR - https://pm-research.com/content/4/1/16.abstract N2 - This article analyzes execution performance of selected dark pools and liquidity aggregation, using transaction costs as a metric. Examination of the characteristics of dark pool execution activity is primarily based on a sample of 12.6 million orders entered during 2007, covering point-in-time matches, continuous crossing, and algorithmic liquidity aggregation. These data are supplemented by an additional 8.2 million orders, executed through diverse means and venues. The results suggest that dark pool execution is beneficial, but that fragmentation of dark pool liquidity enabled through algorithmic trading has neither increased the ability to trade in large size, nor reduced transaction costs relative to direct access to a periodic crossing mechanism. Transaction costs increase with duration, as orders are exposed to dark pools by algorithmic means, motivating the conjecture that movement from one dark pool to another in the execution of a single order engenders information leakage.TOPICS: Exchanges/markets/clearinghouses, statistical methods, portfolio construction ER -