Where trades happen
A venue is a place where buyers and sellers are matched. In US equities there are more than a dozen registered exchanges (NYSE, Nasdaq and Cboe run several each), plus alternative trading systems and broker-dealers that execute orders themselves. The same stock trades on all of them at once.
Lit exchanges show their orders publicly in a limit order book and match them by price and time. Dark pools (alternative trading systems) do not display orders before a trade, which helps large investors avoid revealing their intentions; trades are reported afterwards. Wholesalers, also called internalisers, execute retail orders against their own inventory, usually at a slightly better price than the public quote.
Bonds, FX and most swaps work differently: they trade over the counter through dealers, who quote prices to clients, and electronic platforms, with no single central order book.
- Lit exchange: public order book, price-time matching, regulated as an exchange.
- Dark pool (ATS): no displayed quotes, trades reported afterwards, run by a broker-dealer.
- Wholesaler (internaliser): fills retail orders from its own inventory, often with price improvement.
- Dealer market (OTC): dealers quote prices directly to clients, as in bonds and FX.
Lab · what's graded
- Venue types25 pts
- Where retail orders go10 pts
- Who shows public quotes?15 pts
- Order size against normal volume15 pts
- Why use a dark pool15 pts
- Maker-taker pricing20 pts