Dark pools are alternative trading venues with limited trading transparency. These venues have attracted an increasing fraction of trading volume away from exchanges, raising concerns over their lack of transparency and their potential adverse impact on market quality. To better understand dark pool trading and respond to a recent call for research on the interplay between information costs and new trading platforms, I examine the relation between voluntary disclosure and subsequent dark pool trading. Using dark pool trading volume recently made available by Financial Industry Regulatory Authority (FINRA), I find that, when firms offer more frequent voluntary 8-K disclosure, subsequent dark pool trading intensity is lower. Next, I examine whether voluntary disclosure is associated with informed investors' venue decisions. I find that short sellers, one group of informed investors, trade less off exchange when voluntary disclosure is more frequent. Additional analyses suggest that voluntary disclosure mitigates the adverse impact dark pool trading has on price discovery. Overall, these findings indicate that a more transparent information environment is associated with less trading in dark pools.
