What Is the Risk of Price Discovery Degradation in Markets Heavily Reliant on Dark Pools?

Heavy reliance on dark pools can degrade price discovery because a significant portion of trading volume is hidden from the public. The public market's price (the 'lit' price) may not accurately reflect the true supply and demand if large orders are constantly executed privately.

This can lead to less informative public prices and potentially wider bid-ask spreads. The public price becomes less representative of the total market liquidity.