Legality of Mt Gox's dark pools

[sketchman]

I was wondering how they can get away with operating them, wouldn't such trading get them shut down if a government took a hard look at it?

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[BitterTea]

No. It's run from Japan, and what does that have to do with the dark pool? Many exchanges have areas where you can place "private" bids of one sort or another.

Which do you think is and/or should be true? "That which is not prohibited is permitted" or "that which is not permitted is prohibited"?

[markm]

Dark pools are a great feature for any exchange that wants to reserve the right to step in front of the queue at any moment on their own behalf but would prefer not to advertise the fact that they reserve that right. They can simply step in at any moment and leave people to guess or assume "it must have been a dark pool order I guess" instead of thinking "gee those guys stopped me getting that deal I was properly queued up for and presumably would have gotten were it not for their inability to keep their greedy paws out of it".

-MarkM-

[BitterTea]

Yeah mark, you nailed it...

[billyjoeallen]

my first big (for me) purchase on MtGox, the market mysteriously plunged %15 immediately after I bought. The second time, it spiked just before I bought. I'm not too concerned, as I'm in it for the long haul, but it just seems like either I have fantastically bad timing or MtGox is manipulating the market to steal my nickles and dimes. (doubtful)

[byronbb]

The problem MtGox has imo with the dark pool is transparency. The information present to him and associates about dark orders is valuable and there is nothing but a promise that it is not being used to advantage. 

[markm]

My initial discovery of bitcoin happened because I was looking for software I could use for trading games / trade in games.

I specifically wanted players who owned trading houses to be able to set their software up to buy low and sell high. That is, I assumed many players were not really interested in passing on low prices to the masses, they would prefer to buy low offers and sell to high buy-offers rather than to tell someone who offered a high price "oh gee guy, didn't you see that lower offer, here, I'll let you have the low offer instead of grabbing it myself and re-selling to you at the price you are offering".

I can understand that if other players think your exchange / trading-house does in fact play 34th-street Santa for them that could be a marketing point attracting people to yours instead of to a competitor, heck the 34th-street Santa movie was all about that. But guys, it was just a movie! Does Macey's *actually* tell Gimbels?

Dark pools are such a clever way of obfuscating this that I figure the very same players my original design was intended for will want to also implement dark pools so they can pretend they are not actually buying low and selling high but are in fact trying to play Santa but being thrown some roadblocks by dark pool users but gee our customers demand dark pools so what can we do...

-MarkM-

[bittrader]

There are real dark pools in the mainstream financial world, and they aren't illegal (though they're probably regulated).

[BitterTea]

My initial discovery of bitcoin happened because I was looking for software I could use for trading games / trade in games.

I specifically wanted players who owned trading houses to be able to set their software up to buy low and sell high. That is, I assumed many players were not really interested in passing on low prices to the masses, they would prefer to buy low offers and sell to high buy-offers rather than to tell someone who offered a high price "oh gee guy, didn't you see that lower offer, here, I'll let you have the low offer instead of grabbing it myself and re-selling to you at the price you are offering".

I can understand that if other players think your exchange / trading-house does in fact play 34th-street Santa for them that could be a marketing point attracting people to yours instead of to a competitor, heck the 34th-street Santa movie was all about that. But guys, it was just a movie! Does Macey's *actually* tell Gimbels?

Dark pools are such a clever way of obfuscating this that I figure the very same players my original design was intended for will want to also implement dark pools so they can pretend they are not actually buying low and selling high but are in fact trying to play Santa but being thrown some roadblocks by dark pool users but gee our customers demand dark pools so what can we do...

-MarkM-

More insinuations that MtGox is engaging in fraudulent behavior. Mark, I think it is best if you come out and make your accusation instead of skirting around it like a tool. However, I don't think the community will take kindly to unfounded accusations, so I hope you have some evidence.

You realize that you're free to not use MtGox if you believe they are cheating their customers, right? This is not a government, you have a choice in the matter. I'm sick of people bitching about how they have a "monopoly". Go start your own fucking exchange, this is a free market!

[markm]

I am not claiming any of the bitcoin markets are operating the way I know some of my players would like their in-game exchanges and trading houses to work.

But the fact that such players would love to include dark pools as a cover for their methods does provide reason why some people would prefer not to have dark pools confusing the bid/ask data that they are trying to use to make their decisions.

Sometimes lacks of transparency that might be useful to inside traders are a legal concern, sometimes, it seems, not.

-MarkM-

[Anonymous]

*bitcoin-otc is a dark pool   

[FreeMoney]

*bitcoin-otc is a dark pool   

People trading without sharing the details with everyone is clearly wrong, OTC should be very ashamed.

[markm]

OTC isn't a queue of offers lined up by price with volume indicated so that one can see how much a given number of coins or dollars would cost if you simply bought from the queue.

When such a queue is present it should work.

However maybe at MtGox you can make it work if you wish simply by specifying on your purchase order whether you want to purchase only from the open book not from a combo of the open book and the dark orders so maybe at MtGox it is not a problem.

I have heard people speculating though about seeming mysteries where an order didn't seem to resolve correctly. Maybe they simply had forgotten that they had specified that they wanted their order to be resolved aainst the dark pool as well as the open book?

Or maybe it was not their own order they were wondering about and the history they were trying to resolve didn't say even after the fact which orders had been open and which had sprung out of the dark pool?

-MarkM-

[FreeMoney]

OTC isn't a queue of offers lined up by price with volume indicated so that one can see how much a given number of coins or dollars would cost if you simply bought from the queue.

When such a queue is present it should work.

However maybe at MtGox you can make it work if you wish simply by specifying on your purchase order whether you want to purchase only from the open book not from a combo of the open book and the dark orders so maybe at MtGox it is not a problem.

I have heard people speculating though about seeming mysteries where an order didn't seem to resolve correctly. Maybe they simply had forgotten that they had specified that they wanted their order to be resolved aainst the dark pool as well as the open book?

Or maybe it was not their own order they were wondering about and the history they were trying to resolve didn't say even after the fact which orders had been open and which had sprung out of the dark pool?

-MarkM-

Your order can't get resolved besides at the price you agree to. All this complaining is silly. Some people want to make offers you can't see, big deal. It doesn't change the fact that all you are doing is making offers yourself and that the only thing that can happen is that they get filled or don't.

[markm]

Well great then, people presumably won't have any problem with the for-profit trading houses some of my players want their planet's stock exchanges to function as. You make an offer and it gets filled or not. None of your beeswax if the house bought a cheap offer to sell to you at your price instead of matching your offer to the better price.

They will probably run batches if they do it that way so people cannot keep polling rapidly with tiny steps of price change, just submit offers for each 5 minute or so batch and find out after the batch is processed whether their offer was taken up in that batch.

-MarkM-

[BitterTea]

 I truly have no idea what you're talking about or how it is applicable to the world the rest of us inhabit.

[hazek]

The only concern I have with dark pools is the incomplete information the market gets at all times about the supply and demand where someone might see a significantly less bids than asks and then speculated that the price is likely to drop only to get surprised by a ton of dark bids and get gobbled up by the big fish, losing their Bitcoin and seeing their price rise instead of fall.

If someone can explain to me their theory why that is good for the market I'd really appreciate it.

[BitterTea]

The only concern I have with dark pools is the incomplete information the market gets at all times about the supply and demand where someone might see a significantly less bids than asks and then speculated that the price is likely to drop only to get surprised by a ton of dark bids and get gobbled up by the big fish, losing their Bitcoin and seeing their price rise instead of fall.

If someone can explain to me their theory why that is good for the market I'd really appreciate it.

I don't think it's good, or bad, just irrelevant. A lack of dark pools might cause some to instead place their orders on the open market, but others would just use bots instead. As well, most or all trades on #Bitcoin-OTC do not add pricing information to the market. I don't think anyone is morally obligated to broadcast their trade information, before or after it happens.

Now, I'm not a fan of the current implementation of the dark pool on MtGox, but that will be going way in favor of "iceberg" style orders, I believe.

[benjamindees]

Back when I was using Prudential (now Wachovia), they did all sorts of shady stuff.  They would take your order at the current price and then only make the purchase at a later time when they thought they could make a buck.  Dark pools are bullshit but they are widely used and accepted.