Dark Pool Midpoint Fill - Quant Trader Interview Question
Difficulty: Medium
Category: Market Microstructure
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Topics: market-microstructure, dark-pools, nbbo, execution-price, midpoint
Problem Description
You are trading a stock and observe the National Best Bid and Offer (NBBO) as 100.00 bid / 100.04 ask.
You send a buy order to a dark pool that guarantees execution at the midpoint of the NBBO at the time of the fill. Assuming your order fills at the midpoint, at what price do you execute, and how much do you save per share compared to immediately crossing the lit market spread (i.e., buying at the ask)?
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