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Wall Street’s ‘Private Rooms’ by SirLJ

16 Comments

  • Post Author
    mertleee
    Posted March 17, 2025 at 5:29 pm

    Historically, the "private dark room" has always been a mechanism of goofy elites.

    To an extent these will always exist – but what we define as investigative journalism will likely decide whether we hear about these at all haha.

  • Post Author
    jimbob45
    Posted March 17, 2025 at 5:29 pm

    Carlos Cabana, head of equity sales and trading at CastleOak, dubs the room a “diversity pool,” because the participants are all minority-operated brokerage firms. While in this instance CastleOak doesn’t know specifically who is on the other side of every trade, it knows it will be one of about 10 counterparties who meet certain eligibility criteria related to ownership and investment goals.

    I am convinced that they only added this bit to make sure people would argue about skin color and ignore the implications of the rich making sure the peasants aren't allowed to play the same game as them.

  • Post Author
    dheera
    Posted March 17, 2025 at 5:49 pm

    I've been wading through terabytes of financial data over the past month. (I'm an ML/AI software engineer trying to create a trading bot that makes me more consistent income during times of uncertainty that are outside my control.)

    This is some of the data I'm looking at. NVDA price on a particular day vs. average position of trades in bid ask spread aggregated over 10 seconds, on all the exchanges it is being traded on. When it is close to 1, it is trading at close to the NBBO ask; when it is close to 0, it is trading at close to the NBBO bid.

    https://imgur.com/a/lcCwDsj

    One of the things I found is that the dark pool trades predict price action very well on a few-minute time horizon. "FINRA Alternative Display Facility" on the 2nd plot from the top is all the darkpool trades. If I had access to dark pool trade data in real time I think I could piggyback off the manipulators and make bank.

    Unfortunately the SEC only requires them to report transactions within 15 minutes, not in real time.

  • Post Author
    qweiop
    Posted March 17, 2025 at 5:49 pm

    I remember reading about dark pools and asking a friend in finance if the sector really is as corrupt as it sounds, his reply? "Oh much more"

  • Post Author
    Nifty3929
    Posted March 17, 2025 at 6:03 pm

    It is not clear to me what nefarious things people believe are going on there that we should be worried about.

    All the article says is that people are doing things we don't know about, but implies that somehow we should feel not-okay about this.

    I don't know what's going on in my neighbor's house either, and it could certainly be bad stuff, but that's doesn't mean that it is bad or that I should start spying on them.

  • Post Author
    ajsnigrutin
    Posted March 17, 2025 at 6:14 pm

    Ban high frequency trading, ban instant transactions (put them on hold for some time before buying/selling (hours minmum, longer for larger quantities), make the held transactions public, and tax the profits on a time-owned scale.

    This would turn "investments" into investments again… you really believe that company XY will do something good? Buy stocks and keep them for few years until they grow. Politican John Bobson dumps his stock of ZX company? Well, now we know before they actually get dumped, and can sell our stocks too.

    Buying stocks of a company for 1.7 seconds and selling them back is not an 'investment' by any kind of proper definition.

  • Post Author
    computator
    Posted March 17, 2025 at 6:36 pm

    Do all trades get reported to some agency of the government (including those done in private rooms)?

    Do companies themselves know who owns their shares (including those done in private rooms)?

    If the answer is no to either or both of the above, doesn't that create all sorts of ownership problems? As an analogy, I'm imagining a country where there is no reliable municipal property registry, and no one knows who owns a particular house. Wouldn't that create chaos?

  • Post Author
    robertlagrant
    Posted March 17, 2025 at 6:38 pm

    I don't quite understand this – are these "rooms" where ownership of shares is tracked separately to how an exchange tracks them? E.g. I own 80% of a company, and I keep the official ownership, but let people buy them from me and from each other, but I keep the record of who owns them?

  • Post Author
    gruez
    Posted March 17, 2025 at 6:50 pm

    >They’re offering what are dubbed private rooms, gated venues that take the core benefit of a dark pool — the ability to hide big equity deals so they won't impact prices — and add exclusivity, specifying exactly who can partake in any trade.

    I'm not sure what all the consternation is about. Even without dark pools you could always do direct trades[1] with a party of your choosing, which is even more private and exclusive. The "private rooms" mentioned in this article just makes this slightly more automated than some trader messaging his buddies on the bloomberg terminal.

    [1] https://en.wikipedia.org/wiki/Over-the-counter_(finance)

  • Post Author
    PeterStuer
    Posted March 17, 2025 at 7:27 pm

    Anyone remember the not so distant past when you were labeled a "conspiracy theorist" when you mentioned dark pools?

  • Post Author
    moomin
    Posted March 17, 2025 at 7:48 pm

    If you think this is cause for concern, consider that most economic activity in the US isn’t even on an exchange to begin with.

  • Post Author
    _bin_
    Posted March 17, 2025 at 9:58 pm

    tons of trades have been filled for a long time by IBing your buddy down the street. i don't see how this is particularly different/worse besides maybe improving efficiency.

  • Post Author
    mitchbob
    Posted March 17, 2025 at 10:19 pm
  • Post Author
    onepremise
    Posted March 17, 2025 at 10:21 pm

    It sounds like they want to hide congressional investments and stock trades from their constituents, or at least this could be used in a way to achieve that.

  • Post Author
    6stringmerc
    Posted March 17, 2025 at 10:44 pm

    This actually sounds really cool as a vetting of counterparties and risk reduction for liquidity. I worked munis 2008-2010 in support but learned a ton about all sorts of Wall Street products – traditional and synthetic. So these are for trades, formal, with a bit more teeth to them than CDS type transactions, which even post crash were crazy amounts of money on paper but structured by usually pretty knowledgeable firms (in our pool). Every tool can be misused, and the minority owned room / platform actually seems neat to me. The casino is big and brutal and smaller firms have roles too.

    Will these lead to another London Whale? Time will tell.

  • Post Author
    rvz
    Posted March 18, 2025 at 3:07 am

    "Wall Street" and "Transparency" is an oxymoron.

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