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Next: what is the cost of the gap between bid and ask?
The spread is the cost you do see on a public book. The spread guide shows how it adds up for a bot that trades often.
What is included
- What it is, in plain words
- The formula or mechanism, with exact arithmetic
- How it hits grid, martingale and DCA bots
- A check you can run before you switch a bot on
Who it is for
- People who run or plan to run a trading bot
- Anyone reading a backtest or a bot sales page
- Readers who want the numbers, not the pitch
- Not advice, and not a signal service
Key facts
- A dark pool is a venue where buy and sell orders wait unseen, then match. The public sees the trade only after it happens, if at all in detail. The word dark refers to the missing quotes, not to anything secret.
- The main use is a large order. Showing 10,000 shares on a public book tells everyone, and the price can move away before the order fills.
- In the made-up example below, a 10,000 share buy costs 4.10 cents per share above the best ask on the open book, and 0.70 cents if 4,000 shares fill at the midpoint in the dark (calculated by us on 29 Oct 2026, exact).
- For a retail bot owner this mostly does not matter. Small orders on a public book fill like any other, and a dark pool is not an extra feed you can use.
- The rules about dark venues, reporting and delays vary by country and venue. Check the rules for your own market, because this page keeps to general facts.
What a dark pool is
Most trading venues are lit. They show a book of orders: who will buy at which price and who will sell, and how much. Anyone with the data feed can see that book. A dark pool is a venue that does not show it. Buyers and sellers send orders in, and the venue matches them without showing them first. Often it matches at a price taken from the lit market, such as the midpoint between the best bid and the best ask.
The trade is real and it is reported, usually after it happens and in a looser form than a lit trade. How soon, how much detail and which venues are named depends on the country and the rules there. So a dark pool is not a hidden market that lies outside the system. It is a market that hides its orders, not its results.
Why it exists
Take a fund that wants to buy 10,000 shares of a stock that normally trades in lots of a few hundred. If it puts that order on the public book, other traders can see the demand and may raise their asks or pull them. The more the order shows, the more the price moves against the buyer. That move is called market impact. A dark pool lets a large buyer look for a large seller without announcing it.
It is a trade-off. The buyer may get a better price, but the order may not fill at all, because there may be no seller there at that moment. And in a venue with no displayed quotes, you rely on the operator and the rules to treat orders fairly.
A worked example on a made-up book
The stock below is made up. The best bid is 49.98 and the best ask is 50.00, so the midpoint is 49.990. A buyer wants 10,000 shares. The lit asks are: 2,000 at 50.00, 3,000 at 50.02, 3,000 at 50.05, 4,000 at 50.10.
On the lit book alone, the order walks up the book. The average price comes to 50.041, which is 4.10 cents per share above the best ask, or $410.00 in all. Now suppose 4,000 shares can be matched in a dark pool at the midpoint 49.990. The other 6,000 go to the lit book. The average becomes 50.007, which is 0.70 cents above the best ask, and the extra cost falls to $70.00. Every number is made up and the dark fill is assumed. In practice it could be smaller or not come at all.
| Source | Price | Shares | Cost |
|---|---|---|---|
| Lit book | 50.00 | 2,000 | $100000.00 |
| Lit book | 50.02 | 3,000 | $150060.00 |
| Lit book | 50.05 | 3,000 | $150150.00 |
| Lit book | 50.10 | 2,000 | $100200.00 |
| Lit only, total | 50.041 avg | 10,000 | $500410.00 |
| Dark, at midpoint | 49.990 | 4,000 | $199960.00 |
| Lit book (rest) | 50.00 | 2,000 | $100000.00 |
| Lit book (rest) | 50.02 | 3,000 | $150060.00 |
| Lit book (rest) | 50.05 | 1,000 | $50050.00 |
| Part dark, total | 50.007 avg | 10,000 | $500070.00 |
Lit only: $500410.00 / 10,000 = 50.041
Part dark: $500070.00 / 10,000 = 50.007
Midpoint = (49.98 + 50.00) / 2 = 49.990
This is why a dark pool exists. It is not a way to get a better price in general. It is a way to reduce the footprint of a large order, at the cost of uncertainty about whether the order fills.
What a retail bot owner can and cannot see
- Can see: the lit order book that your platform shows, the prices of lit trades and the volume that prints. Many data sources also show the total volume that includes reported dark trades, often with a delay.
- Cannot see: the dark orders waiting to match, who the buyer or seller was, or how big the order was before it traded.
- Partly see: after the event, an off-exchange print may appear in the trade data with a flag. What the flag means and how soon it appears varies by market.
Be careful with claims that a bot can read dark pool activity to see what big players are doing. A dark print is a trade that already happened. It does not say what the buyer will do next, and the side of the trade (buy or sell) is usually not given. It cannot be treated as an early signal without a test, and any such test has all the usual problems in how to backtest a trading strategy.
Why it mostly does not matter to a retail bot
A retail order is small. Buying a few hundred shares or a small position in other markets does not move a lit book, so there is no impact for a dark pool to avoid. Some brokers send retail orders to venues that fill them off the public book, which can be at the quoted price or slightly better. Whether that happens, and how it is disclosed, depends on the broker and the market, so read your broker's execution policy. For a bot, the practical effects are on what it measures: slippage, the spread and how well a backtest on public prices matches the live fills. Sudden large volume with little price movement can be partly explained by dark prints, but it can have many other causes.
The study of who traded on which side, in the data you can see, is in order flow. Firms that trade fast across many venues are covered in high-frequency trading.
What it does not tell you
This page does not say a dark pool is good or bad, or that it helps or hurts small traders. It describes the mechanism with made-up numbers. The details of any venue depend on its rules and the law where it operates.
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FAQ
Frequently Asked Questions
What is a dark pool?
A private trading venue that does not show its orders to the public before they trade. Trades are reported afterwards under the rules of the market.
Is a dark pool illegal?
No. They exist in many markets under rules that set what must be reported and when. Those rules vary by country, so check the ones for your market.
Why do institutions use dark pools?
To trade large orders without showing them first. A big visible order can move the price against the buyer before it fills.
Can a retail trading bot use dark pool data?
A bot can read the delayed prints that appear in some data feeds, but they show trades that already happened, often without the side. Any use would need a proper test.
Does a dark pool affect my bot orders?
Probably very little. Small orders do not move a lit book. What matters more are your spread, slippage and fills, which vary by broker and market.
Are the numbers on this page real?
Example numbers are made up to show how the maths works, and the page says so. A figure only counts as exact when the page says it was calculated on a stated date. Nothing you enter in a calculator leaves your browser.
Can I use this to decide whether to run a bot?
It can show whether a bot's numbers hold together and how much an account can lose. It cannot say what the market will do, and it is not advice. Use it to ask better questions, then read the terms of your own broker or exchange.
Is this financial advice?
No. It is general education about market structure. The prices and sizes in the example are made up.
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