How do dark pools work?
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Direct sales of shares through private exchanges. They work the same as any other exchange except the information of the trade is not public.
A normal market is hundreds of people who place orders to buy or sell stock, but each order transfers information that allows others to make guesses about future moves. If you ask to buy 100 shares every day, and then one day you instead want to by 50,000 that tells everyone else something about your beliefs about the stock and they may adjust their own prices in response.
If two large entities contact each other outside of the market and one would like to buy 200,000 shares and one would like to sell 250,000 shares, they can agree to trade 200,000 at an agreeable price and the market impact of the resulting 50,000 share purchase on the market will be considerably smaller than their combined purchase and sales on the open market.
Dark pools are methods of connecting large buyers and sellers outside of the public market.
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