Dan Romero
@dwr.eth
Naive finance question: why do stocks have a an exchange they are listed on if they can trade on multiple exchanges and dark pools?
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Connor McCormick ☀️
@nor
I feel like @thatalexpalmer.eth would know this
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Alex Palmer
@thatalexpalmer.eth
Thanks @nor @dwr.eth dark pools fall under categories of brokerages (one who makes trades on your behalf) and ATS (alternative trading system). Once a stock is allowed to trade on a national securities exchange, it's allowed to trade everywhere that abides by the same regulation.
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Alex Palmer
@thatalexpalmer.eth
A stock that trades on national securities exchange updates its price. Dark pools don't, because their purpose is semi-private trading. Simplifying -> if Berkshire Hathaway wants to buy $9B worth of Apple stock, using an exchange would affect APPL price. By the time all $9B was bought, its price would be higher.
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Connor McCormick ☀️
@nor
right but the question is basically the opposite of this. Why not put everything into a dark pool? Maybe a more ideological way to ask this question is: if the main role of an exchange is information centralization, then in a world where the goal is (sufficient) decentralization are there alternatives to the exchange?
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Alex Palmer
@thatalexpalmer.eth
The main role is not centralization, it is reconciliation of records in disparate systems and having them all say the same thing. Coordination of recorded data at scale is challenging, especially when that data is meant to be immutable. Dark pools would make a global price index impossible.
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Alex Palmer
@thatalexpalmer.eth
RE: ideology - ideology has to meet reality and ask, "what are the next reasonable steps to achieving what we idealize?" The vast overwhelming majority of ideologies are fantasies that refuse to deal with reality.
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