While many stocks fall into 'black holes', some financial institutions are creating 'dark pools'

As existing stock markets struggle around the globe, financial heavyweights are already in the process of developing something that very few know about. Regulators are far too busy with the current economic crisis to worry about the rise of 'dark pools' among financial heavyweights, but something significant is going on behind the scenes.

http://www.businessweek.com/investor/content/oct2007/pi2007102_394204.htm

Dark pools sound like something from Greek mythology or a sci-fi epic, but in stock-market speak they are private trading networks that big brokerages such as Lehman Brothers (LEH) and Merrill Lynch (MER) have developed primarily for the internal matching of orders between buyers and sellers who are clients of the same brokers. But dark pools have developed links among Wall Street firms as well, so that orders can be matched across different brokerages. Indeed, some firms are teaming to launch new dark pools such as BIDS Trading.

http://www.moneymorning.com/2008/07/10/dark-pools/

Most investors have never even heard the term - and are truly shocked to discover these "off-the-books" trading networks actually exist.

But to Wall Street insiders looking to anonymously move billions of dollars in stocks, bonds, and other investment instruments, dark pools are de rigueur - especially when you’re an institutional trader who doesn’t want to reveal your intentions or your actions to the "rest" of the market, until after the fact when the orders are "printed."

And that makes these dark pools of capital highly problematic when it comes transparency: There is literally none in most pools and only limited visibility in others.

http://www.bloomberg.com/apps/news?pid=20601109&sid=aivW.I7zTkrc&refer=home

The days when a broker such as JPMorgan relied on relationships to lure new orders are long gone. Low costs are a top priority for investors, and brokerages tout their computer programming prowess along with their expertise in specific markets. They use complex algorithms to track the probability of completing a trade at a specific exchange or to predict a stock's price during the next 30 seconds.

An increasing share of trading is being done through brokerages' private electronic markets, known as dark pools--so called because they pair off orders without posting quotes on public exchanges.