Wall Street’s ‘Private Rooms’

What Private Rooms/Dark Pools Are

• Seen as off-exchange venues that hide pre-trade information (large resting orders) but still print trades to the consolidated tape at or within the NBBO.
• Several commenters stress they’re mechanically similar to traditional OTC/block trades; “private rooms” just automate and gate who can interact.

Perceived Legitimate Uses

• Main use: execute very large institutional orders without moving the displayed price or revealing intentions to HFTs and predatory strategies.
• Institutions value the ability to control counterparties (e.g., avoid “toxic” flow, trade mainly vs. passive/index or retail-like flow).
• Some say this reduces volatility on public exchanges and improves execution for pension/401k money, not just “Wall Street”.

Concerns About Fairness, Corruption, and Insider Trading

• Strong sentiment that opaque venues inherently enable manipulation, insider trading, and wealth transfer from unsophisticated participants (retail, index funds).
• Others argue insider trading rules apply equally on lit and dark venues; dark pools merely hide order books, not post-trade data.
• Widespread distrust of enforcement: SEC seen as going after easy targets, fines as “peanuts”, executives rarely held personally liable.
• Debate over whether executives should be criminally liable for misconduct under them; sharp disagreement on feasibility vs. justice.

Information Asymmetry & Data Latency

• One commenter using ML finds dark-pool prints predictive of short‑term price moves; wishes for real-time access but notes reporting delays.
• Another corrects: regulatory trade reporting for off-exchange trades is supposed to be within seconds; any 15‑minute delay is likely vendor/product, not law.
• Discussion of costly “professional” data feeds vs cheaper retail feeds and whether dark-pool prints are truly delayed.

HFT, Market Structure, and Reform Ideas

• Some see dark pools/private rooms as a defensive response to HFT and hyper-fragmented, millisecond markets.
• Others defend HFT/market makers as liquidity providers skimming tiny spreads without long-term risk.
• Proposed fixes: ban HFT, enforce holding periods, batch auctions (per-minute crosses), or slower markets; critics say this creates new arbitrage, reduces liquidity, and may benefit large firms.

Transparency vs. Privacy in Markets

• Philosophical split: markets as a public good needing maximal transparency vs. acceptance that large private trades, like wholesale deals, are normal business.
• Concern that growing private volume could hollow out public markets, increasing volatility and eroding price discovery.

“Diversity Pools” and Counterparty Selection

• Example of a “diversity pool” restricted to minority-owned brokerages sparks debate.
• Some see it as practical counterparty vetting and niche ecosystem-building; others think the identity framing distracts from the broader power imbalance and exclusivity of such venues.