Earlier on Wall Street believed that dark pool help clients negotiate better deals, but now they are associated with fraud and market manipulation.
In a recent scandal involving dark pool, the Attorney General of New York has accused Barclays that translated bank deals in your dark pool without the prior consent of the investors, misleading them.
In one day, Barclays lost about $ 5 billion market capitalization.
For information, “dark pool” – private stock exchanges. Theoretically, the bank can reduce the buyers and sellers of its trading book, which reduces costs and therefore beneficial to both parties. Also, it is believed that in dark pool customers can get a better price.
Both of these theories were disproof. Stock exchanges – a good example of a natural monopoly, where buyers and sellers get the best price terms with the extension and not the reduction of the exchange. Despite this, dark pool continue to function as more revenue banks Wall Street. In fact, dark pool allow them to secretly trade against their clients.
It seems that Madison Avenue is on the same footsteps.
Last week, the advertising group WPP announced that it plans to create the first dark pool in the media field, his private trading platform. Something like Goldman Sachs stated in 2011: “If you trade on a private exchange, you can save on Trade Commission and obtain more favorable pricing environment.” Unfortunately, it contradicts the logic of how to actually work markets.
Greycroft company owns significant investments in the media, which can be influenced by this trend, but it should make them think and other investors. The question arises – why publisher willfully proceeds from trading platform Google, which receives a large income to the site WPP, which promises to lower income?
Likely present here backroom deals. In the past, technology companies lured publishers to new platforms through guaranteed costs, enabling them to earn an income of at least the same as before.
Our media companies are doing it out of balance and take into account the risk that the scheme may not work.
I wonder what is the use of customers. One thing is clear, this is exactly profitable advertising agencies that are on both sides of the transaction.
So buyers beware. Buy promotional products on the open market.