What’s a Ping Pool? A VIP Lounge for Dark Trading

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There are casinoes that greet everyone, by the busload. Then there are casinoes the hell is by summon exclusively, designed for big rollers. In world markets, stock exchanges are the first style. Ping pools are the second. And like anything else with a velvet line, they’re making intense affair among the persons left outside.

1. What are ping funds?

They’re alternative stock-trading venues, mainly run by sizable electronic-trading houses. Virtu Financial Inc. and Citadel Securities operate the largest ping puddles. Jane Street Group LLC started its own such venue in 2014; IMC Financial Marketplace launched one last year.

2. How are these different from nighttime reserves?

Like dark ponds — the private exchanges inside some of Wall Street’s biggest banks that made large-scale investors swap huge blocks of capital in secret — ping pools volunteer more privacy than well-known public exchanges. But dark ponds bring prescribes together from many different investors. By compare, the company operating a ping pond handles the transactions itself, applying its own money to buy what investors want to sell, and exchanging what they want to buy. Dark pools currently account for about 15 percent of U.S. stock exchange trading, while ping ponds handle less than 2.5 percent.

3. What’s in it for investors?

The VIP investors who use ping ponds can benefit from better tolls and avoid paying exchange rewards, while enjoying the kind of privacy found in all nighttime trading.

4. How do fund motorists interest?

Trading merely with investors you know reduces hazard, and thus costs.

5. Is this new?

Not entirely. Ping pools have existed for years but has been increasingly alluring to electronic-trading firms as scant volatility has them searching for new ways to make money. Ping funds are too transforming up in a slightly different flesh in Europe, where regulatory changes, including brand-new trading restrictions on gloom consortia, has led banks and trading firms to register as “systemic internalizers ,” a gradation that allows them to use their own fund to trade with clients.

6. So, where’s the’ ping ‘?

Brokers “ping ,” or inquiry, the motorist with an degree from a client. They do that in the hope of going a better rate than on an exchange. Some off-exchange trading pulpits have special relationships with retail dealers, who they pay for the have opportunities to replenish mom-and-pop crafts. The rule, known as pay for guild flood, has raised questions about conflicts of interest.

The Reference Shelf

A QuickTake on dark pools.

A QuickTake Q& A on systemic internalizers.

A QuickTake Q& A on the debate over fee for lineup flow.

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