Occasional Paper No. 60: Banning Dark Pools: Venue Selection and Investor Trading Costs

This paper shows that investors can reduce their execution costs by selecting venues with less pre-trade transparency, such as dark pools or venues with similar characteristics.

Occasional Paper No.60 (PDF)


In this paper, we use a proprietary transaction-level dataset from the UK's equity market, to analyse the impact on transaction costs of venue choice and a recent ban on dark pool trading (the ‘Double Volume Cap (DVC)’).

We show that:

  • trading on venues with lower levels of pre-trade transparency is associated with lower transaction costs (measured as lower implementation shortfall)
  • reductions in transaction costs also occur from trading in alternative venues, such as ‘periodic auctions’, when ‘dark’ trading is banned
  • neither a recent ban on dark pool trading, nor its suspension, significantly affected the transaction costs of investors in the UK equity market


Christian Neumeier, Arie Gozluklu, Peter Hoffmann, Peter O’Neill, Felix Suntheim


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