Gazing Into 'Dark Pools,' ... Anonymous Insider Tradinghttps://www.cnbc.com/id/100400981
Cohen has not been charged with any crimes. A spokesman for Cohen said, "The firm and Steve Cohen are confident he acted appropriately."
The complaint also offered a look at how "dark pools" allowed Cohen's firm to trade millions of shares and hundreds of millions of dollars of stock virtually undetected.
Dark pools are essentially private stock exchanges reserved for the largest traders, including hedge funds, major institutional funds, pension funds, and big banks. The pools use computers to match buyers and sellers of a particular stock, drawing pricing data from public stock exchanges like the New York Stock Exchange or NASDAQ.
While all exchanges have a degree of anonymity, dark pools have an increased level of secrecy because neither the size of the trade nor the identity of the participants are revealed until a trade is filled. It's like the childhood pool game of "Marco Polo," except all the players are blindfolded rather than just one. As a result, there is no way of knowing if just one broker, one trader or one firm doing all the buying or selling.
That means institutions trying to unravel or rapidly accumulate large positions in a company can avoid the large increases or decreases that often occur when a major trader begins acquiring or dumping a stock. Essentially, without knowing who is doing the buying or selling, other investors can't recognize a sudden large increase in supply or demand, experts on the pools tell NBC News.