The relevance of dark trading for information acquisition in the German stock market

• We investigate the information acquisition role of dark pool trading. • The European double volume cap (DVC) mechanism acts as an exogenous shock. • Price jump ratio measures information acquisition around earnings announcements. • We show that information acquisition is aided by dark pool trading. • DVC mechanism weakens the relationship between dark trading and information acquisition. The implementation of the European double volume cap (DVC) mechanism acts as an exogenous shock to help understand how restrictions on dark trading affect the price discovery process for German stocks. Using the price jump ratio as a measure of information acquisition prior to earnings announcements, we show that dark pool trading aids information acquisition. This relationship is stronger for negative earnings news, for stocks that are hard to value, and when there is uncertainty around earnings. The introduction of the DVC mechanism weakens the relationship between dark trading and pre-announcement information acquisition.