Conditional Orders in Equity Trading

As the US equities marketplaces grows increasingly fragmented it becomes difficult for traditional buy-side traders to divine in which of 33 dark pools the other side of the trade will appear. To ensure that firms do not miss the trade, buy-side firms are turning to conditional orders to aggregate dark liquidity for trading large blocks of shares. Despite the widespread adoption of conditional orders in trading US equities, many investors know little about them. This is not surprising when considering the complexities surrounding the evolving use-cases for conditionals, as wells as the fact that each ATS offers its own flavor of the conditional order.

This TABB Group report examines the variants of conditional orders across dark trading venues, the current and future state of the conditional orders, the ways in which conditionals integrate with execution algorithms, and the methods to protect users from predatory trading.

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