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Adam’s Take: Redefining Dark Liquidity

Download Adam's Take: Beyond the ATS: Redefining Dark Liquidity


Over the last few years, the composition of off-exchange volume for US exchange-listed securities has come into sharper focus. In late 2015, FINRA began publishing ATS data, which not only made it possible to measure ATS market share, but the percentage of off-exchange volume done in an ATS versus traditional dealer activity, or Over-the-Counter (OTC) trading. However, until recently there was little data into the kind of activities that comprised OTC volume. How much of OTC volume was retail business dominated by wholesalers such as Citadel and KCG versus purely institutional flow?

FINRA’s recent release of limited data on OTC venues adds key insights into the volume puzzle. For the first time, we have an accurate but incomplete breakdown of OTC volume by broker. When you combine this new data with the well-known ATS data, the liquidity picture comes into sharper focus. Ultimately, this data can help traders identify which brokers or platforms should be used to maximize liquidity access and how that liquidity could be accessed.

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