Dark Pool Liquidity: Notion, Purpose, and Pros

Aug 10, 2021

Dark Pool Liquidity: Notion, Purpose, and Pros

Liquidity is among the crucial factors that impact a brokerage or exchange company’s success; this is why both beginners and experienced business owners take a string of measures to provide traders with the highest liquidity.

Liquidity Pools for FX brokers and crypto exchange

Liquidity providers (LPs) frequently unite diverse institutions to provide brokers and exchanges with access to the highest liquidity volumes. For instance, Tier 1 Forex LPs connect your brokerage business with giant banks and funds that control billions of dollars. Those major players execute your traders’ orders within milliseconds, no matter whether a trading pair is popular or exotic enough.

As for cryptocurrencies, the notion of liquidity refers to a certain amount of assets locked by LPs to help traders buy and sell digital currencies any time they want.

Aside from the understanding of liquidity from this viewpoint, both brokers and exchanges may connect their businesses to dark pools of liquidity (DPL).

What is a dark liquidity pool: diving into the terminology

In general terms, dark or black pools of liquidity mean trading volumes that are not publicly accessible. Most of the deals are made by major financial players outside public platforms, and this factor makes those deals anonymous.

As such, DPLs make it possible to hide the information about deal parties, prices, volumes, and even the fact a deal has been made. For instance, traditional financial markets are transparent, and participants wishing to make a high-value deal need to cut it into a set of smaller ones to hide it. Black pools of liquidity enable parties to hide all the information easily.

Such platforms offer the same rules as traditional brokers and exchanges: there are bid and ask orders, time priority; meanwhile, prices and traders are not displayed. This said such a pool is filled by the dark water, and when a participant dives, he (she) sees no other players and market potential.

The following ways of a DPL creation are distinguished:

1) A deal is executed by a bunch of smaller companies simultaneously that hide the intentions of major players.

2) A broker establishes a platform for such deals.

3) An exchange enables users to make anonymous deals.

Pros and cons of Dark Pools of Liquidity

While talking about the key advantages of DPLs, the following aspects are pointed out:

1) Such pools minimize the impact of giant deals on a market. That is a financial law when institutional investors and other major players come to the market and buy or sell large blocks of assets, the market moves in a certain direction. DPLs exclude such a situation.

2) Major players face better prices. A dark pool liquidity invites large players only; this is why participants get more chances to have their orders executed at higher prices than on publicly accessible platforms.

3) Deals made inside dark pools are not charged fees; this said participants cut their expenses.

As for the cons of these pools, experts highlight the following weak points:

1) Price difference. If we compare prices on anonymous and public platforms, they may diverge essentially.

2) Dark liquidity pools are not transparent; this is why inefficiency of trading, abuses, and conflicts of interest are possible on anonymous platforms.

As such, dark liquidity pools open new horizons for major players; meanwhile, those platforms are characterized by a string of weak points, as well.

Subscribe Our Newsletter

Order Matching Engine - the Heart of a Crypto Exchange

Oliver

Order Matching Engine – the Heart of a Crypto Exchange

Assume you are a trader. You've placed a purchase order for $10,000 and a sell order for $11,000 in Bitcoin. Then, all of a sudden, both of your commands have been carried out! What caused this to happen?

Crypto Exchange Business
5 Essential Steps to Starting Your Own Forex Brokerage

Oliver

5 Essential Steps to Starting Your Own Forex Brokerage

An excellent way to get into online trading is to launch a forex broker. But, like with any company, there are a few things to think about before jumping in. This article will show you how to become an FX broker and discuss in detail five essential steps to starting your own forex business.

Forex Business
Get the ultimate solution: B2BinPay Get the ultimate solution: B2BinPay
Sponsored
Alex

B2CORE Integrates AlfredPay, TopChange Pay, and JetaPay to Boost Transaction Capabilities
B2BROKER, a global fintech solutions provider, has announced a major update for B2CORE, its flagship CRM and back-office ecosystem. The platform has integrated three leading payment service providers: AlfredPay, TopChange Pay, and JetaPay. These integrations are set to streamline the deposit and withdrawal experience for end-users, making transactions more convenient directly within the B2CORE interface. […]

discover
Spot ETFs Surge: Impact of Potential Ethereum ETF Approval

Oto

Spot ETF Gains Momentum: A Closer Look at Potential Ethereum Approval

There may be multiple reasons why the price of digital currencies swings. Recently, ETH prices have risen significantly, and this increase might be related to a higher probability that the U.S. SEC would approve a spot ETF. The market is already paying close attention to the SEC’s upcoming rulings on Ethereum spot ETFs since these […]

Crypto
Contact us bg

Contact Us

Contact the Liquidity Provider
for any questions and advertising inquiries

    Please fill out this contact form to get in touch with us

    / 3000

    By clicking “Get in touch” button, you agree to the privacy policy

    Successful!
    Thank you for your request.
    We will contact you shortly.
    Close

    Alex

    Top 10 Fintech Website Development Agencies for 2025

    Best Fintech Website Development Agencies for 2025

    Сonstantine

    Internal vs External Range Liquidity In ICT Trading Explained

    Internal vs External Range Liquidity In ICT Trading

    Constantine

    Portfolio Backtesting — Tools, Metrics, and Methods Explained

    Portfolio Backtesting

    Сonstantine

    ICT Trading Explained: Smart Money Concepts, Tools and Setups

    ICT Trading Explained

    Сonstantine

    CFD Trading Strategies: A Practical Guide to Risk and Execution

    CFD Trading Strategies

    Alexander

    What is a Fair Value Gap? A Guide to Trading Market Imbalances

    What is Fair Value Gap

    Vitaliy

    Triangle Patterns in Trading: Mastering Ascending, Descending & Symmetrical Strategies for Maximum Profit

    Triangle Patterns in Trading: Ascending, Descending & Symmetrical Guide

    Alexander

    What Is COTI? Payments, Token & Price Prediction

    What is a COTI coin

    Constantine

    Best Copy Trading Software in 2025

    Best Copy Trading Software in 2025

    Alex

    What Is an AI Agent? The Future of Finance Explained

    AI Agent Explained

    Constantine

    How to Start a Liquidity Provider Business?

    How to Start a Liquidity Provider Business

    Constantine

    How to Start a White Label Brokerage?

    How to start a white label brokerage

    Constantine

    How to Start a Multi-Asset Brokerage?

    How to Start a Multi-Asset Brokerage

    Hazem

    Crypto Ransomware – How They Happen and How to Avoid Them

    Crypto ransomware explained

    Constantine

    Best Web3 Browsers in 2025

    Best Web3 Browsers

    Constantine

    Best DAO Projects in 2025

    Best DAO projects in 2025

    Alexander

    Crypto Nodes That Pay: Your 2025 Guide to Top Passive Income Opportunities in Crypto

    crypto nodes that pay

    Alex

    Pi Network: Scam or Groundbreaking Crypto? The Full Analysis

    Pi Network Explained

    Constantine

    Triple Net Lease: Meaning, Benefits, and Strategies Explained

    Triple Net Lease

    Constantine

    Hanging Man Pattern: How to Identify and Trade It Effectively

    Hanging Man Pattern

    Alex

    5 Infinite Banking Mistakes That Could Cost You Thousands

    Infinite Banking Mistakes to Avoid

    Aleksander

    Solana Firedancer: Solving Solana’s Biggest Problems with a New Engine

    Solana Firedancer explained

    Alexander

    What Is an Interest Coverage Ratio? How to Use This Financial Metric to Evaluate Company Health

    Interest Coverage Ratio Explained

    Hazem

    After-Hours Trading: Can You Trade After Financial Markets Close?

    After-Hours Trading Explained
    liquidity-provider-logo
    • News
      • Stock Market Forecast
      • Stocks
      • Banks and Finance
      • Companies
      • Crypto
      • Forex
      • AI
      • Technology
      • DeFi
      • NFT
    • Articles
      • Crypto Payments
      • Trading
      • Crypto Exchange Business
      • Forex Business
      • Fintech
      • Liquidity
      • FinTech Awards
      • Blockchain
      • Investing
      • NFT
      • DeFi
    • More
      • Videos
      • Liquidity Providers List
      • Crypto Payment Providers
      • White Label Brokerage Platforms
      • Broker CRM Platforms
    [email protected]

    © 2024 Liquidity Provider. All Rights Reserved

    Privacy Policy Cookie Policy
    This site is registered on wpml.org as a development site. Switch to a production site key to remove this banner.