Dark Pool vs. Lit Market Execution - Quant Trader Interview Question
Difficulty: Medium
Category: Market Microstructure
Practice quant interview questions from top firms including Jane Street, Citadel, Two Sigma, DE Shaw, and other leading quantitative finance companies.
Topics: dark-pools, market-impact, liquidity, execution
Problem Description
A large institutional investor wants to execute a block order of 100,000 shares of a relatively liquid stock. They are considering two options: executing the order in a lit exchange or through a dark pool. Assume there is no information leakage from pre-trade indications of interest (IOIs). What are the primary advantage and primary risk the investor faces if they choose to execute the entire order in a dark pool compared to a lit exchange?
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