This order seems to be misleading. By design dark ping fill rate will be notably less than exchange fill rate and that does not make it worse to ping a dark pool prior to an exchange. By pinging dark first The client may receive better prices, more size at a lower impact..
https://twitter.com/dlauer/status/1501226200936685571
Not removing the exchange quote can be beneficial for trading a large parent order when there is more behind. If you receive 15% fill rate in dark that does not mean that 85% of the times that you did not get a fill in dark, you wont get a fill in exchanges afterwards..
They aren’t mutually exclusive. What matters is whether on average with pinging + exchange you get better fill rate + price improvement rather than going only to exchanges. You usually do. Entirely possible that DB didn’t but the FINRA order does not say that clearly. ..
All it gives is a stat that fill rate within their dark pool was 12-32% as compared to a lit exchange which by design will be ~ 100%. It is easy to conclude based on this description that brokers should not send ping dark pools before going to exchanges..
..That may lead to worse execution. Based on reading the order it seems to me that the real issue may have been giving preference to their own dark pool vs other dark pools when a report (due to a “BUG”!) told them that other dark pools were better…
Fine, but why confuse everyone by introducing this stat that their own dark pool fill rate was worse than exchange fill rate. It would be impossible for it to be otherwise.
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