Informed Trading in Dark Pools: Fair-Access Dark Venue vs. Restricted-Access Dark Venues

Prior empirical studies find that dark pools are, on average, associated with uninformed order flow. The “exemption from fair-access requirement” has been conjectured as a necessary condition for dark venues to segment uninformed order flow. This study presents direct evidence contrasting a dark venue that offers equal access to all market participants to other dark pools which have the ability to subjectively exclude order flow. Using the period leading up to surprise corporate earnings news, I document robust evidence of informed trading taking place in the fair access dark venue. I do not find such evidence in other dark venues.