Unlike 'lit' exchanges, dark pools are not accessible by the public, and the size and price of orders are not revealed to other investors. Dark pools are private exchanges, usually used by large institutions that often want to execute on a big sale with privacy. Large banks are using these dark pool exchanges to disguise what they are doing and protect their larger strategies.
Off-exchange markets account for nearly 40 percent of dark pool volume. Despite recent controversy, including the Barclays suit, dark pool exchanges are highly regulated and are subjected to regular audits, similar to open or transparent exchanges.
Read MoreShining the light on dark pools
These alternative trading venues have been around for a long time and were often referred to as upstairs trading.
Kenny Polcari, director of NYSE floor operations at O'Neil Securities, explains.