Published : 9 May 2023
The term "upstairs market" describes a network between big businesses and institutional investors. Block orders or large trades are common in this network. Networks of trading desks that handle large volumes of trades are present in upstairs markets.
These markets are referred to as "dark pools" at times. Dark pools are financial exchanges, networks, or forums that are privately run by the parties involved and where trading activity takes place.
The upstairs market is a (private) network made up of institutional investors, brokerage houses, and intermediaries, while the downstairs markets are stock exchanges. Large trading volumes take place in the upstairs market, whereas smaller trades are typically made in the downstairs market.
1. In some circumstances, such as when executing programme trades that call for multiple transactions to be executed simultaneously, using qualified intermediaries in the upstairs market might actually be the only practical way to implement the strategy.
2. Institutional investors may also profit from the upstairs market's lower transaction costs. The firms involved could pay significantly lower overall commissions or other fees by executing a large block order with just one or a small number of institutional counterparties