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Darker Than a Dark Pool? Welcome to Wall Street’s ‘Private Rooms’

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Katherine Doherty

Sun, Mar 16, 2025, 2:00 PM 10 min read

(Bloomberg) -- Wall Street’s infamous dark pools are getting even darker.

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A decade after being engulfed by a controversy that culminated in multiple enforcement actions and a regulator clampdown, these off-exchange trading platforms are touting a way to buy and sell stocks that’s even more opaque.

They’re offering what are dubbed private rooms, gated venues that take the core benefit of a dark pool — the ability to hide big equity deals so they won't impact prices — and add exclusivity, specifying exactly who can partake in any trade.

Created within the dark pools themselves, the rooms are independent from one another and each is invisible to anyone not invited, raising questions about both market transparency and fragmentation. But with more than half of all US stock trading now happening away from public exchanges, they’re in high demand from firms eager to choose whom they do business with, often to help them carry out individual orders more efficiently.

“It’s like shopping when you know exactly the item you want, and who and where you are buying or selling it from, instead of going to Walmart on Black Friday,” says David Cannizzo, the head of electronic trading at Raymond James and Associates. “You’re controlling the terms of engagement.”

Right now, it’s impossible to say how many private rooms exist, or how much activity is moving through them. Companies operating alternative trading systems, or ATS — the formal term for dark pools — say it’s a minority of their volumes at present, since the growth in demand is a relatively new phenomenon.

But they’re seeing rapid adoption by everyone from broker-dealers and market makers to hedge funds and asset managers, so much so that private-room volumes at one major ATS — Stamford, Connecticut-based IntelligentCross — now eclipse the total trading activity at nine rival dark-pool operators.

Dark pools are so-called because the trades they handle happen away from the “lit” public exchange. That helps prevent order details leaking to the broader market and triggering adverse price moves before they can be executed. But there’s still a downside: a pool is open to anyone, and firms inside never know who their counterparty is in any trade. Private rooms can be even more discreet.

“It’s about exercising control, what liquidity a broker wants to interact with to achieve better execution quality,” says Roman Ginis, CEO of Imperative Execution, the parent company of IntelligentCross.

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