Dark Pools: The Rise of the Machine Traders and the Rigging of the US Stock Market
Regulators have taken steps to address the concerns about market rigging by machine traders using dark pools. For example, the Securities and Exchange Commission (SEC) has implemented rules requiring dark pools to disclose more information about their trading activities. However, more needs to be done to ensure that the market is fair and transparent.
The rise of machine traders and dark pools has transformed the US stock market. While these developments have increased efficiency and reduced costs, they have also created new risks and opportunities for abuse. The manipulation of the market has significant implications for investors and the economy, and regulators must take action to ensure that the market operates fairly and transparently. Dark Pools: The Rise of the Machine Traders
It is a tax on every transaction made by ordinary investors—skimmed off the top, pennies at a time, billions of times a day. Patterson describes this as "rigging" in plain sight: a transfer of wealth from the retirement accounts of teachers and factory workers to the hedge funds of Greenwich, Connecticut.
These are gated venues within the dark pools themselves, independent from one another and invisible to anyone who isn't explicitly invited. They add a new layer of exclusivity to the core benefit of a dark pool—allowing firms to choose exactly who they trade with. One provider, IntelligentCross, reports that its private-room volumes now eclipse the total trading activity of nine rival dark-pool operators. Patterson's insight—that opacity breeds further opacity—has proven to be more accurate than anyone could have imagined. The fragmentation and lack of transparency he warned about over a decade ago have only intensified, pushing the market further into a shadowy, fragmented state that the original architects of the electronic revolution, like Josh Levine, could never have envisioned. The rise of machine traders and dark pools
The high-frequency traders, the very providers of liquidity that the market had come to depend on, simply . Their sudden and simultaneous withdrawal created a "double liquidity void," a complete absence of both short-term and long-term buyers, causing the Dow to plummet nearly 1,000 points in under 30 minutes before a miraculous, and equally inexplicable, recovery. For regulators, the crash was a bewildering anomaly. For Patterson, it was a terrifying and logical endpoint of a 15-year "arms race," a stress test for a new and deeply unstable financial architecture that had failed spectacularly. The book serves as a post-mortem for a near-death experience that the financial system has already forgotten.
The proliferation of proprietary dark pools managed by major Wall Street banks fragmented the financial landscape. Instead of a centralized public marketplace, liquidity split across dozens of private venues. Structural Consequences It is a tax on every transaction made
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