TY - JOUR T1 - Understanding and Avoiding Adverse Selection in Dark Pools JF - Trading SP - 64 LP - 77 VL - 2010 IS - 1 AU - Nigam Saraiya AU - Hitesh Mittal Y1 - 2010/03/20 UR - http://guides.pm-research.com/content/2010/1/64.abstract N2 - The explosive growth of high-frequency trading (HFT) activity presents a host of challenges for traders looking for quality block executions in dark pools. HFT firms are making over $21 billion in annual profits, according to the TABB Group, and much of that is derived by capturing short-term alpha at the expense of traditional buy-side traders. Adverse selection is no longer as straightforward as it once was or as easy to avoid. This article looks at several methods for measuring both short-term and long-term adverse selection, as well as how to effectively filter for quality liquidity. ER -