Saturday, June 6, 2009

"DARK" pools of liquidity

"A prudent question is one-half of wisdom" - Francis Bacon

Came across an article in the ST about this "Dark" pools of liquidity now in Asia, this is something really new to me.

Anonymous or "dark" pools of liquidity have extended their operations beyond the United States, and are now operating in Asian markets, particularly in Singapore, Hong Kong and Japan.

Dark pools are private networks that operate away from traditional exchange houses, offering investors anonymity. They are used by institutional investors to trade large quantities of shares, without moving the market in a big way such block trades usually do.

Examples include Liquidnet, the largest independent operator of dark pools in the United States, which has operations in Asia; and BlocSec, which is part of CLSA Asia-Pacific markets.

One question that come to my mind is the source of funding from these "Anonymous" investors. Are they dirty money that "cannot see daylight"? How these investors acquired their wealth? Are they using "dark" pool for money laundering? How are they regulated? Their money muscle could be partially responsible for the recent stock market rally. I hope to be enlighten.

With the demise of many Hedge Funds, we are seeing something new now coming out from the United States. Americans are really ingenious in coming out with new ideas to beat the system.

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