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a cap of 8% is to be imposed onthe total consolidated amount traded in any stock during a trading day in the dark and 4% of total trading per stock on a single dark venue. What will happen?
dark pools will be opened, dark pool fragmentation-> execution risk up-> informed will move to lit (price discovery up)
Given analogy between limit orders and options, how would you expect the bid-ask spread to be related to volatility in stock prices?
As volatility rises, options become more valuable. So limit order submission would be at worse prices, so spreads should rise.
Effects of dark fragmentation
-reduced anonimity -increased execution risk (less counterparties)
-informed traders move to lit exchange, higher BAS
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