Dark pools and dreck pools
Posted by Charles II on March 7, 2010
Kevin Brown of FT has an important article here (FT asks that one not quote their articles, and the link requires login. I can guarantee that free access to FT is worth every penny and then some.)
The gist of the article is that Asians are increasingly taking trading off the floors of the exchanges and executing them privately. This practice, which is worldwide, is incredibly dangerous, adding the the already impulsive gambling style of stock market transactions which are for no obvious reason called “investment.”
These private transactions are called “dark pools.” They could allow, for example, an insider to dump his shares outside of normal trading hours and ahead of an announcement. They facilitate tax evasion, trading of phantom shares, over-leveraging (using an asset to back more borrowing than is warranted), and so on. Unfortunately, the author only cites vague regulatory concerns.
Completely unrelated, Joseph Menn has an interesting piece about busting the Mariposa botnet and other computer criminals. Prior to Mariposa, Wired’s blogger Kevin Poulsen was less impressed by the threat of botnets, as was Ryan Singel, but it’s not clear whether this has changed their minds.
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