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Dark Pool Trading and Information Acquisition

Author

Listed:
  • Jonathan Brogaard
  • Jing Pan

Abstract

Theory suggests that dark pools may facilitate or discourage information acquisition. We find that more dark pool trading leads to greater information acquisition. We measure information acquisition using stock price dynamics around earnings announcements. To overcome endogeneity concerns, we exploit a large exogenous decrease to dark pool trading that results from the implementation of the Security and Exchange Commission’s (SEC’s) Tick Size Pilot Program. The results cannot be explained by lit venue liquidity, algorithmic trading, or informational efficiency. A battery of additional tests, such as documenting a shift in SEC EDGAR searches, supports the information acquisition interpretation.

Suggested Citation

  • Jonathan Brogaard & Jing Pan, 2022. "Dark Pool Trading and Information Acquisition," The Review of Financial Studies, Society for Financial Studies, vol. 35(5), pages 2625-2666.
    • Handle: RePEc:oup:rfinst:v:35:y:2022:i:5:p:2625-2666.
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    File URL: http://hdl.handle.net/10.1093/rfs/hhab098
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    Cited by:

    1. Gomber, Peter & Sagade, Satchit & Theissen, Erik & Weber, Moritz Christian & Westheide, Christian, 2023. "Spoilt for choice: Determinants of market shares in fragmented equity markets," Journal of Financial Markets, Elsevier, vol. 64(C).

    More about this item

    JEL classification:

    • G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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