Matt Seiler is thumbing through a copy of Michael Lewis’ “Flash Boys.” It’s not just any copy -- it’s a personally annotated version of the bestseller edited by Seiler himself, and it has become required reading for his team at Interpublic’s Mediabrands. Seiler becomes animated, almost agitated, as he points to underlined passages that make direct connections between Wall Street’s high-speed trading systems and Madison Avenue’s programmatic audience-buying marketplace. He pauses with his forefinger on one, pokes at it, and says: “Dark pools. That’s what our private exchanges really are.”

The dark pools Seiler was referring to are Wall Street’s private exchanges, where big financial firms trade large volumes of securities via private contracts that are “dark” to the publicly regulated marketplace.

The same thing is happening on Madison Avenue, and Seiler has been using his annotated copy of “Flash Boys” to make that point -- that what has largely been a transparent marketplace of auction-based pricing on open exchanges is increasingly becoming the ad industry’s equivalent of dark pools, or private exchanges based on private negotiations between agencies and big media companies.

In effect, Seiler says, the the ad industry’s biggest players are swinging back to what they’ve always done -- using their market intelligence and their relationships with media suppliers to constrain supply and create leverage that they believe benefits their clients. Instead of old-school haggling on the phone, or across a dining table, they’re just using computers to facilitate those deals programmatically so that they are faster and require less labor in the process.

The shift toward private exchanges has been building for some time, but it has taken off this year as more mainstream publishers begin embracing programmatic trading to create direct pipelines into the big agencies’ trading systems. After decades of fits and false starts to create paperless trading -- from “direct electronic data interchange” to “ebiz” -- the supply-side is finally catching up with the demand-side, as virtually every major supplier of digital audience impressions embraces some form of programmatic trading.

That’s when WPP’s GroupM dropped a major bombshell, announcing plans to pull out of open exchanges altogether and move all of its programmatic buying exclusively into private exchanges. In an accompanying Q&A, GroupM Chief Digital Investment Officer Ari Bluman explains the move in detail, and reveals that GroupM has been working on the plan for years, but began accelerating private marketplace deals in recent months to create what is effectively Madison Avenue’s version of one of Wall Street’s dark pools -- a private marketplace where tradeable inventory is scraped off before it reaches the public marketplace.

Bluman cites a litany of factors that led to the shift, including concerns about the quality of audiences that can be bought on open exchanges due to issues like “viewability,” “non-human” bot fraud, the safety of content environments, etc. -- but he candidly acknowledges that the moves are due equally to preserving the kind of leverage the world’s biggest media buyer could only maintain in private negotiations with equally big suppliers of media. Bluman estimates GroupM’s dark pool already has agreements with about 100 of the industry’s top publishers, and he believes it's conceivable that it could end up with as many as a thousand.

Among other reasons, he says, the goal is to keep as much of GroupM’s and its clients' market behavior away from prying eyes, and to avoid feeding open market intelligence that could benefit suppliers or competitors seeking to model the marketplace based on a transparent view of supply and demand.

It’s gutsy move, but far from the first time GroupM has sought to use its considerable marketplace leverage to make or break a media market. Bluman’s non-digital peers are known for establishing recent trading currencies in the national TV marketplace, first establishing Nielsen’s so-called “C3” ratings (live commercial audience ratings plus three days of time-shifted viewing) and then this year shifting it to “C7” (live plus seven days of time-shifted viewing). While it’s unclear how GroupM and its clients benefited from the shift to C7, its generally understood that the agency holding company negotiated extremely favorable terms for its clients as a result of it.

As for GroupM’s digital shift out of a RTB and exclusively into dark pools, Bluman says it is consistent with the history of the company. Unlike Wall Street, whose markets are regulated, the emergence of an open RTB marketplace was an almost accidental confluence of factors that happened because some industrious, tech-minded entrepreneurs saw an opportunity to create “liquidity” for the vast amounts of audience impressions that went unsold by both “premium” digital publishers, as well as the long-tail. The earliest stages involved the formation of ad networks that simply packaged and resold those impressions, but that ultimately evolved into open exchanges where anyone could bid for the right to buy a real-time audience impression.

To date, much of the concern about open RTB -- or real-time bidding -- is that it was stacked against suppliers, because the technology and the business rules enabled savvy advertisers, agencies and trading desks to bid the price of their audiences down. More recently, a new breed of technology companies -- so-called “supply-side platforms,” or SSPs -- have begun investing in better technology and data to give publishers more leverage and upside for participating on open exchanges. Instead of “racing-to-bottom," the way some naysayers use the term RTB, these SSPs are enabling publishers to identify opportunities where they may get a higher yield for their advertising impressions on open exchanges.

That isn’t so unusual, says Jason Fairchild, a co-founder of the OpenX exchange. “Thirty percent of the bids through the OpenX exchange are $5 or higher,” he says, adding, “and we see multiple bids in the hundreds of dollars or even thousand-dollar range.” By bids, Fairchild isn’t talking about cost-per-thousands, but for real-time bids to reach an individual user -- suggesting that RTB sometimes is anything but the bottom of the the pricing barrel.

During MediaPost’s recent RTB Insider Summit, Fairchild disclosed one recent bid request processed through OpenX’s exchange for $1,300 to reach one person. He says bids like that, while not the norm, only happen because an advertiser or its agency or trading desk has data about that individual revealing that they are an extremely valuable consumer “in-market” for something they want to influence them to buy.

Fairchild says he shares stats like that as part of an effort to encourage more premium publishers to participate in open exchanges, because he wants to create “more liquidity” and make more premium inventory available on the exchanges. If more publishers see the upside to making their best audience inventory available in open exchanges, he says, they will make more of that inventory available. That in turn will attract more demand from advertisers seeking to reach the most valuable audiences and the open RTB marketplace will continue to expand.

It is, in effect, the yin to the yang of GroupM’s dark pool play.

“They basically want to go back to an IO-driven model of doing business directly with the publisher,” Fairchild says, referring to the acronym for an “insertion order,” to the traditional way that agencies negotiated and place buys in media. The only difference, he says, is the process is becoming more automated, but the terms of the deals are negotiated up front before the inventory ever reaches the private exchange.

One of the chief concerns from open exchange operators like OpenX, Google, Yahoo and others is that if more private marketplace deals are created it could end up scraping some of the most valuable audiences out of the public exchanges, because audience impressions that would have otherwise gone public remain in the dark pool.

No one is exactly sure how much of an impact GroupM’s move will have on the overall digital marketplace. Unlike TV, or even some specific forms of digital media, GroupM likely does not represent a constraining share of the online display marketplace. Like search, a big part of the open RTB marketplace is made up of long-tail advertisers.

“I have a brand like Unilever and Unilever right now is competing in the open exchange with Joe’s pizzeria,” explains GroupM’s Bluman, adding that his goal is to keep his agency’s clients from competing directly with the rest of the “riffraff” in the open RTB marketplace. He says he can do that, by scraping the best of the top publishers’ audience impressions before they ever make it onto the exchanges.

That may or may not be the case. Regardless of how many publishers GroupM can strike private marketplace deals with, the volume of the open marketplace will always be greater and others believe it will give GroupM a blind eye to potentially valuable audience impressions, or at the very least, to intelligence about how the marketplace values them.

“Discovery could become a problem,” says Alex Gardner, vice president-platform solutions at Toronto-based Casale Media. By discovery, Gardner means the ability for people trading on open exchanges to observe the market’s behavior. He notes that the trend among big brands has been going in the opposite direction, with big advertisers embracing the open exchange marketplace, including such giants as Procter & Gamble, American Express, Target and Netflix.

In fact, a recent survey of major advertisers and agencies suggests marketers are moving more aggressively in that direction than their agencies are, which could be an indication that more of them are taking their programmatic trading in-house, or working with third-party suppliers other than their agencies or trading desks. The study, which was conducted by Advertiser Perceptions Inc., late last year, found that, “marketers are expecting to spend significantly more on programmatic than agencies right now and the next few years,” says API Chief Strategy Officer Kevin Mannion. “This leads to the conclusion that, given that agency spending is with marketer dollars, that marketers are to a significant degree spending outside the agency on programmatic.”

Some observers believe that might be a factor influencing GroupM’s decision to take all its digital media private in order to keep its clients from taking some or a portion of their digital trading in-house.

In any case, he believes the overall trend is moving in GroupM’s direction, and that by the end of the year when GroupM says it will be 100% private, half or more of all digital display could be traded privately.

It’s a guestimate he says, based on what Casale knows about the U.S., and especially the Canadian marketplace. Casale is the largest trader of audience impressions in Canada and trades a significant amount of them in the U.S. too.

“Right now, we estimate about 15% to 20% of programmatic buys are via private exchanges,” he says, “but it is increasing rapidly. I wouldn’t be surprised if it was the majority of dollars by the end of Q4.”

Casale is among the big tech players that’s trying to resist the shift toward dark pools, mainly because it believes open markets are healthier for all sides so of the industry -- both supply and demand. To that point, it is just embarking on what Gardner calls “an interesting experiment” to see if it can attract the most premium publishers, brands and agencies to conduct business in an open and well-lighted place.

The experiment is called the Canadian Premium Audience Exchange, or CPAX, and it is an attempt to pool the programmatically-traded inventory of Canada’s most premium publishers in an open and fully transparent auction-based exchange. The publishers include major Canadian broadcasters such as CBC/Radio-Canada, Rogers Media, Shaw Communications, Corus Entertainment, Cineplex, V and Télé-Québec, as well as premium print publishers such as Quebecor Media and Reader’s Digest.

CPAX is being powered by Casale’s open RTB Index Platform, and Gardner says that initially, only credentialed agencies will be permitted to bid on it. Over time, he says, CPAX may allow “arbitrageurs,” including agency trading desks or others who make a market by buying and re-selling inventory, but they will be required to buy “seats” on the exchange in order to put some skin in the game and to give CPAX a way of overseeing how they do business.

Like Casale’s Gardner, OpenX’s Fairchild doesn’t believe open and private exchanges are an either/or propositionand that “two worlds can coexist.”

While some of the business may shift into Madison Avenue’s dark pools, he says it’s just another way for agencies like GroupM’s to structure deals and “get first-look impressions” before the rest of the marketplace.

“I don’t think it will have a chilling effect” on open RTB, he says. “We can coexist.”