Institutional Investor's Alpha Magazine - July/August 2008 - (Page 53)

Alpha Bytes Dark Pools Into the Light New software and smart routers make it easier for traders to navigate the mysterious world of the private electronic trading networks known as dark pools. “If you want to play in this complex world, you better understand all the tools and all the tricks of the trade.” Joseph Gawronski, president and COO, Rosenblatt Securities. New York, July 1, 2008. J oseph Gawronski, president and chief operating ofﬁcer of New York–based Rosenblatt Securities, ﬁelds a constant barrage of questions from clients about trading methods and strategies. He says that over the past year one topic has seemed to be getting all the attention: dark pools. These private electronic trading networks have been multiplying so quickly that more than 40 now exist, offering alternative arenas for traders to buy and sell stock away from traditional exchanges. The rise of dark pools has created a complex web of alternative liquidity sources that are difﬁcult to manage, integrate and assess. “People are naive if they think there is an easy answer,” Gawronski says. “There is a lot of education and homework required.” Photos by Henrik Olund for Alpha In the discreet world of hedge fund trading, dark pools seem the perfect venue. Shrouded in secrecy — even a basic statistic like volume is hotly debated — they offer a way for hedge funds to trade large blocks of stock without attracting attention. But not all dark pools are created equal. Some inky-black ones strive to guard every tidbit of information; others more gray than black afford outsiders a foggy glimpse of trading activity. And the mix is constantly shifting as new players arrive and traditional trading service providers, like banks and exchanges, expand dark pool access. Software developers have been scrambling to keep up, trying to create easier ways to access dark pools while also erecting safeguards to protect traders. But danger often lurks behind a user-friendly dark pool interface. Software that readily transports the trader from desktop to JULY/AUGUST 2008 • INSTITUTIONAL INVESTOR’S ALPHA • 53 By Irwin Speizer

Table of Contents Feed for the Digital Edition of Institutional Investor's Alpha Magazine - July/August 2008

Institutional Investor's Alpha Magazine - July/August 2008 Contents Letter from the Editor Longs & Shorts Pension Corner: Mr. Big Goes Small The Good Guys: Adopt This School! Interview: Man's Great Hope Cover Story: The Gentleman Activist Strategies: The New Bankers Profile: Staying Alive Research Center: The Best of the East The Asian Sensations Alpha Bytes: Into the Light Unhedged: Commentary: Speculating on Washington

Institutional Investor's Alpha Magazine - July/August 2008

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