Alternative trading system
Also known as: ATS
An alternative trading system is a trading venue that matches buyers and sellers outside the traditional exchanges like the NYSE or . It is registered with and regulated as a -dealer rather than as a full exchange, which gives it more flexibility in how it operates and what it discloses about pending orders. are the best known type of alternative trading system, but the category also includes and other venues built for specific kinds of order flow.
These venues exist because not every trade benefits from happening on a public exchange in full view of the market. moving large blocks of often prefer an alternative trading system precisely because it can execute the trade with limited or no pre-trade visibility, reducing the risk that other traders see the order coming and move the price before it fills. Retail also route significant volume to alternative trading systems and other off-exchange venues as part of normal order execution.
A large and growing share of US trading now happens away from the primary exchanges through these venues. That has made alternative trading systems a regular subject of regulatory attention, since more trading happening outside the public can affect how much information is reflected in the prices displayed on exchanges. For an , the practical takeaway is that a trade might execute in a venue that never publicly showed the order it filled against, even though the confirmed price still has to meet standards.