Dark Pool Trading

Dark pools are private, off-exchange trading venues where large institutional investors — mutual funds, insurance companies, hedge funds, and sovereign wealth funds — can execute large block trades anonymously, without pre-trade price transparency to the broader public market. Because orders are not displayed in the public order book before execution, dark pool trading minimises market impact and prevents prices from moving adversely against a large order before it is filled. In India, SEBI permits a form of block deal execution through dedicated block deal windows on NSE and BSE, which serve a similar function — enabling large trades at negotiated prices within a defined range of the market price, without the disruption that a fully visible large order would cause in the open order book.