Big Money Stock Flow

We discussed stock block trades. We defined a block trade as 10,000 shares of stock or $200,000 or more in notional value of a single transaction. This would imply that the trade maybe an institutional trade given the size of the transaction.

In addition, we had a few questions regarding market data and dark pools. We talked about the difference between what a retail investor is allowed to see and what an intermediary such as a broker and market maker gets to see. The retail investor gets to see the top of book quotes. This is the minimum requirement from SEC. This way the retail investor can check for best price execution on the consolidated tape. With level 2 quotes, you would get to see the top of book for each exchange. However, this only is a small part of the overall picture. Professional intermediaries will have access to the depth of the order book for each exchange and some broker dealers run dark pool centers with institutional working orders. So although, you may be able to check for best price execution, you may not have a complete picture as far as price discovery.

Dark pool trades are transactions that are not executed on the lit exchanges such as NYSE and NASDAQ but occur in dark pool exchange. The dark pools do not display the liquidity (meaning the bids, ask prices or the sizes of interest) to the public. However, when a dark pool trade is matched up the trade has to be reported on the consolidated tape after execution. This allows us to see what traded on the dark pool.