Distribution of Wealth

[gene]

I am with imanikin on dark pools.

I don't know why people considers dark pools as evil. It's like saying insider trading is evil.

I don't know about evil, but they both are used to manipulate markets.

It seems clear that many here do not wish to see fair markets or better information with which to make decisions. Pretty much the same situation as what exists on wall street seems to be emerging here. Another big scam.

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[ribuck]

I don't know why people considers dark pools as evil. It's like saying insider trading is evil.

I don't know about evil, but they both are used to manipulate markets.

Insider trading brings a price closer to the underlying asset's "true" value as soon as possible. By doing so, it protects outsiders who would otherwise be buying and selling at a "false" price based on their lack of insider knowledge.

Laws against insider trading mean that the biggest profits go to those who break the law, at the expense of everyone else. Legalized insider trading would minimize the profits that can be made by insider trading, because the market price would become accurate sooner.

[imanikin]

I think you are confusing freedom with ability to harm others through your actions

I don't accept that an offer to trade can harm others.

Of course, an offer to trade can't harm others!

My point is that a large hidden trade on that hidden offer in the main exchange for a given commodity does affect and distort price discovery, and harms other market participants.

[ribuck]

My point is that a large hidden trade on that hidden offer in the main exchange for a given commodity does affect and distort price discovery, and harms other market participants.

The term "price discovery" represents a fallacy. It suggests that there is some "true price", and if only the market can allow everyone to discover it we'll all be happy.

In fact there is no "true price" to be discovered. A "market price" emerges as the net effect of transactions that actually take place, and it has no meaning until after those trades occur.

[imanikin]

http://bitcoincharts.com/markets/
look how many exchangers publish data in a kind of standardized format.

  That's where i usually look already.

Look at the microscopic volume of Btc trade in those other exchanges compared to MtGox. It's obvious to me that the players in those markets mirror the MtGox rates.

It may not always be so, but for now MtGox trading activity is the reference worldwide price setter for Bitcoiin.

[imanikin]

The fact that dark pools are only available to large traders, really shows the privacy argument to be the red herring that it is...

The owner of Mt.Gox doesn't want to deal with the additional work for dark pools for small trades, that doesn't prevent anyone else from setting up dark pools without those conditions.

You are right that there will be exchanges without dark pools or arbitrary limits.

It's pretty lame if MtGox actually processes all dark pool trades manually. The "extra work", imho, is as much of a red-herring argument as the "trading privacy" one. 

 

[MoonShadow]

The fact that dark pools are only available to large traders, really shows the privacy argument to be the red herring that it is...

The owner of Mt.Gox doesn't want to deal with the additional work for dark pools for small trades, that doesn't prevent anyone else from setting up dark pools without those conditions.

You are right that there will be exchanges without dark pools or arbitrary limits.

It's pretty lame if MtGox actually processes all dark pool trades manually. The "extra work", imho, is as much of a red-herring argument as the "trading privacy" one.  

Perhaps, but whatever the case may be, your opinions are worth about as much as mine on this matter, which is to say, none.  The only opinion that is of concern is that of MtGox.  Even if you could convince a large number of people of your position (which you cannot) there would still be nothing that you could do to compel MtGox to change his policy.  Even if he came out and openly agreed that dark pools favor large investors in an unfair manner.

It is, ultimately, his property.  That is the definition of freedom.

[marcus_of_augustus]

45K is not a large trader in the currency markets.

For those who need a re-adjustment of their perspective, many here it seems, over $4 trillion is traded daily in foreign currency markets.

[imanikin]

imanikin’s right.

No he is not.  He has a right to his opinion, but that is all that it is.  Apparently both of you need some remedial economics education.

...As is your opinion, except that IF you benefit from the dark pools and similar scams, your opinion is biased... 

The economics lesson you are teaching us is one that is already being pounded into all of us by the hypocrites among the Wall-Street free marketeers though periodic financial crises: this education comes down to an acceptance of a simple double-standard.

The small investor is brain-washed to accept and embrace the infallible wisdom of the “free market”, because all participants have equal opportunities in it. Also to be accepted is that some are far more “equal” than others. 

For the small trader, it's the tough love, lack of trading privacy, full exposure to and full brunt of the market forces. For the large investor, it's the protection from all of that within dark pools, insider trading, and other “free market” shielding scams. If the crap really hits the fan, for the latter there is also the protection of the nanny state, which is not available to the small investor either.

You need remedial education of a far more basic kind: it's the kindergarten lessons, where we were all taught that any game works best if all players follow the same rules... 

[imanikin]

So what? The current selling orders are highly relevant to the current price. To hide the biggest chunks of it, means to decieve normal users, as they will think Bitcoins are worth much more.

Also, Mt.Gox just happens to be the biggest exchange place for this. The others do not matter so much, at least until now.

As dark pools are currently done at MtGox, trade data is public after the trades occur, so the pricing metrics are not affected. 

Agreed. They are not affected for that trade. That's the point: the pricing metrics for that trade would have been affected by the natural market forces , if the trade had been in the open. Dark pools are specifically set up for the large trader to cheat such unfavorable effects of the free market, as they continue to proselytize them as positive and unavoidable to others.

After the the dark trade, its public data does affect the subsequent pricing and trading decisions of all participants.

There isn't really anything special about dark pools other than anyone can use them without needing a script to do it.

The truth is that not everyone can use them, because there is the lower limit. I do congratulate you though on your wealth in red herring with that script argument. If automation is so great in this case, then there is no reason to set an arbitrary participation limit on it. Let's all trade with dark pool automation!

Large dark pool dwellers wouldn't like that, because then the equal rules would remove their advantage... 

[imanikin]

The small investor can watch the market, and isn't forced to advertise his intentions, When there is a suitable ask or bid on the market, the small investor joins the market and makes a trade.

A dark pool just automates this process for the big investor.

Fantastic! No reason not to automate it for everyone then, in a "free market" where all have equal information and opportunities. Unless, of course, one would want some privileged group to have an advantage through cheating in a tried and true Wall Street way... 

The large investor is just as capable of watching the market, and making the trade in the open. In fact, they have the resources to have a script do it, as creighto mentioned.

So, dark pools and their participation limits are not really about privacy, extra workload for MtGox, or automation for the few. Dark pools are simply about giving large traders the ability to cheat the free market and its natural forces through hiding market real volume and pricing information, until they make their trade.

I believe in the sanctity of the "free market" and I don't care about it's supposed "forces", because in a free market I'm not subject to any forces. If someone else wants to trade at a price that suits me, I trade.

  If you are "not subject to any forces" of the marketplace, i congratulate you, because you are the only one that can honestly say that!
The rest of us are subject to them; the large investors even have dark pools available in order to avoid and cheat some of those forces.

There's no stench from a voluntary trade.

Agreed, if the trade is all about you and your transaction partner in some isolated place where only the two of you can smell it. When it's happening in an open, worldwide, price-setting exchange, all its participants have to involuntarily inhale it to some degree... 

[MoonShadow]

imanikin’s right.

No he is not.  He has a right to his opinion, but that is all that it is.  Apparently both of you need some remedial economics education.

...As is your opinion, except that IF you benefit from the dark pools and similar scams, your opinion is biased... 

The economics lesson you are teaching us is one that is already being pounded into all of us by the hypocrites among the Wall-Street free marketeers though periodic financial crises: this education comes down to an acceptance of a simple double-standard.

And the Devil knows the Bible better than any preacher, and uses it to justify his position.  That neither makes the bible wrong, nor the Devil right.

[MoonShadow]

So what? The current selling orders are highly relevant to the current price. To hide the biggest chunks of it, means to decieve normal users, as they will think Bitcoins are worth much more.

Also, Mt.Gox just happens to be the biggest exchange place for this. The others do not matter so much, at least until now.

As dark pools are currently done at MtGox, trade data is public after the trades occur, so the pricing metrics are not affected. 

Agreed. They are not affected for that trade. That's the point: the pricing metrics for that trade would have been affected by the natural market forces , if the trade had been in the open.

The trade, dark or not, is affected by the market rate.  Once the dark trade is complete, it likewise affects the market price and therefore other trades, dark or not.

 Dark pools are specifically set up for the large trader to cheat such unfavorable effects of the free market, as they continue to proselytize them as positive and unavoidable to others.

And you know this how?  Are you inside MtGox's head to be able to know what his intentions are, beyond what he has already stated were his intentions?  You may not believe his logic, but you don't know his thoughts.

There isn't really anything special about dark pools other than anyone can use them without needing a script to do it.

The truth is that not everyone can use them, because there is the lower limit.

The truth is that anyone can set up a market and set whatever rules that they desire.

 I do congratulate you though on your wealth in red herring with that script argument.

I do mock you though, on your inability to present an argument at all.  Can you define "red herring" without googling it?  Based on how you are using it, "I don't think it means what you think it means".

 If automation is so great in this case, then there is no reason to set an arbitrary participation limit on it. Let's all trade with dark pool automation!

You may not see any reason to set an arbitrary participation limit on it, but you are not he-who-gets-to-decide.

[imanikin]

The most convincing part of it is that dark pools functionality is effectively a replacement of a bot which big players would need to develop if dark pool option was not available. As such it is simply something that makes life easier for some market participants and it even can be argued that it creates more even playing field where small players have no unfair disadvantage as compared to large players. Fair enough for me.

Well, if dark pools create “a more even playing field", then i want to play cards for real money with you, dude! 

You open your cards to me when we are playing, and i'll hold them hidden from you the usual way. That would make life easier for SOME participants, as you said... 

The bot functionality would work just as well trading in the open then, if it were in place just to make life easier for some.

The bot functionality is not implemented in the open in order to shield  large traders from the natural forces of the "free market" – the same forces they proselytize to others as the economic panacea.

If that were not so, small traders would be allowed to trade in the dark pools also.

[imanikin]

I am with imanikin on dark pools.

I don't know why people considers dark pools as evil. It's like saying insider trading is evil.

I don't know about evil, but they both are used to manipulate markets.

It seems clear that many here do not wish to see fair markets or better information with which to make decisions. Pretty much the same situation as what exists on wall street seems to be emerging here. Another big scam.

Right. I think that's an important point: if a perception – right or wrong – develops on Main Street, that the darkest and most manipulative practices of Wall Street are being implemented within the Bitcoin system, that sentiment would slow the acceptance and  damage the trustworthiness of Bitcoin on Main Street.

That would be a negative development for those of us, including me, who wish Bitcoin to succeed as no other currency has done before!

[Anonymous]

Wall Street is corrupted by more perverse forces that aren't touching Bitcoin at the moment.

[Dude65535]

Here is a example that makes a dark pool more useful than a bot.

Trader A is willing to sell at price X and trader B will buy at price X. If each is using a bot waiting for a matching sell or buy order the trade will never happen. However if each places a dark pool order the trade will complete.

[fergalish]

I think the acid test of whether dark pools give an unfair advantage to big traders or not, would be to create a "open" dark pool with no minimum trade requirements.  If the big traders start to trade there, then there's no advantage.  If they stick to the "closed" dark pools, then there is.

I find it hard to understand how any rational person can disagree with imanikin - big traders will always seek maximum advantage.  If they end up trading in a dark pool, then there'll be a reason.  But, let me ask imanikin a question: suppose there was some advantage for small traders in using a dark pool with *maximum* trade limitations i.e. no big trades allowed.  Would you happily see big traders cut out?

It's really an age-old dilemma.  bitcoin is supposed to level the playing field, but it *will* sustain the status quo in that there will still be a separation between rich and poor.  In fact, it may well augment that separation insofar as taxes, supposedly impossible with bitcoin, are one way to transfer wealth from rich to poor.

Some people will think that's a good thing, some people will think it's bad.

[marcus_of_augustus]

The thing about "big" traders is that one day there were all "small" traders ... but not many vice versa.

[Grinder]

The thing about "big" traders is that one day there were all "small" traders ... but not many vice versa.

Unless they inherited their money, which is the case for about 3/4 of the wealth in the US today.