Sunshine Trading

What is Sunshine Trading?

Sunshine trades are block trades that are prematurely disclosed to the market through announcements before an order is placed.

Sunshine trading will cause volatility in the market simply because of the size of the position taken, but this strategy can help minimize potential negative impacts. Instead of the deal causing huge ripples in the market, if the parties involved reveal some or all of the details of the deal ahead of time, the market can easily prepare for the outcome.

key takeaways

  • Sunshine trades are block trades that are prematurely disclosed to the market through announcements before an order is placed.
  • Sunshine Trading aims to reduce investor confusion and speculation by making block trades more transparent and reducing any negative impact on the market.
  • Investors may be able to realize lower transaction costs by announcing their anticipated deals in advance. Sunshine transaction announcements can also alert and attract other investors and related parties who may not be paying attention.

Learn about Sunshine Trading

Sunshine Transactions are conducted in an open and transparent manner, with full disclosure by all parties involved in the planned transaction activities. Sunshine Trading aims to reduce investor confusion and speculation by making block trades more transparent. This transparency results in the market being perceived as more reliable and fair.

Investors planning large deals can also realize lower transaction costs by pre-announced their upcoming or upcoming deals. Announcements of transaction intent can also alert and attract other investors and related parties who may not have noticed. This in turn can help balance and stabilize the impact on the market.

The term “sunshine trading” may mean conveying the idea of ​​illuminating trades, rather than executing trades in the symbolic darkness of a dark pool trading environment. The term may also be inspired by the concept of the Sunshine Law, which is a set of rules that require certain meetings and other proceedings of government agencies, boards of directors, or other entities to be held in public and available to the public.

Sunshine Trading and Dark Pool Trading

The opposite of sunlight trading is dark pool trading, where most traders do not know who is trading or the size of the trade. Dark pools sound mysterious, and in many ways, they are. These are private exchanges where investors trade securities on their own segregated forums, in areas inaccessible to the general investing public.

As a common trading platform that has been around for decades, dark pools involve their potential pitfalls. The problem mainly stems from the lack of transparency on the exchange. Specifically, dark pools may present the potential for conflicts of interest and may also create conditions that allow predatory trading practices by block traders.

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