Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Courses
  • Home
  • Economics, Finance, & Analytics
  • Investments, Trading, and Financial Markets

Alternative Trading System - Explained

What is an Alternative Trading System?

Written by Jason Gordon

Updated at April 17th, 2022

Contact Us

If you still have questions or prefer to get help directly from an agent, please submit a request.
We’ll get back to you as soon as possible.

Please fill out the contact form below and we will reply as soon as possible.

  • Marketing, Advertising, Sales & PR
    Principles of Marketing Sales Advertising Public Relations SEO, Social Media, Direct Marketing
  • Accounting, Taxation, and Reporting
    Managerial & Financial Accounting & Reporting Business Taxation
  • Professionalism & Career Development
  • Law, Transactions, & Risk Management
    Government, Legal System, Administrative Law, & Constitutional Law Legal Disputes - Civil & Criminal Law Agency Law HR, Employment, Labor, & Discrimination Business Entities, Corporate Governance & Ownership Business Transactions, Antitrust, & Securities Law Real Estate, Personal, & Intellectual Property Commercial Law: Contract, Payments, Security Interests, & Bankruptcy Consumer Protection Insurance & Risk Management Immigration Law Environmental Protection Law Inheritance, Estates, and Trusts
  • Business Management & Operations
    Operations, Project, & Supply Chain Management Strategy, Entrepreneurship, & Innovation Business Ethics & Social Responsibility Global Business, International Law & Relations Business Communications & Negotiation Management, Leadership, & Organizational Behavior
  • Economics, Finance, & Analytics
    Economic Analysis & Monetary Policy Research, Quantitative Analysis, & Decision Science Investments, Trading, and Financial Markets Banking, Lending, and Credit Industry Business Finance, Personal Finance, and Valuation Principles
  • Courses
+ More

Table of Contents

What is an Alternative Trading System?How Does an Alternative Trading System Work?Key Takeaways Regulation ATS ExplainedAcademics Research on Alternative Trading System (ATS)

What is an Alternative Trading System?

An alternative trading system (ATS) is a non-exchange trading platform that is approved by the Securities and Exchange Commission (SEC). Buy and sell orders are matched on this trading platform to find counterparties ready to engage in trade. Investors or traders can subscribe to ATS so as to get their orders matched. Alternative trading systems are common in the US and Canada for regulatory purposes, they are considered as broker-dealers and not exchanges.

Back to:INVESTMENTS & TRADING

How Does an Alternative Trading System Work?

Alternative Trading Systems (ATSs) are a popular non-exchange avenue for trading. They are electronic trading systems that are approved by the SEC to execute buy and sell orders. One of the major attributes of ATS is its high liquidity amongst other trading platforms and exchanges ATSs are required to undergo a registration process, these platforms focus on matching but and sell orders but do not function as actual exchanges, instead, they are registered as broker-dealers. There are some differences between ATS and national exchanges. For instance, an ATS cannot regulate the conduct of subscribers because they have no power to set rules guiding the behaviors of subscribers. Exclusion of certain subscribers from trading cannot be done on ATS as against what is obtainable in national exchanges where traders can face disciplinary actions. Individual investors and institutional investors can trade on ATS, rather than on national exchanges. The reason for this is mostly because ATS transactions do not show on national exchange order books and can, therefore, be easily shielded from public view. 

Key Takeaways 

Here are some key points to know about the alternative trading system;

  • An alternative trading system is an electronic platform where buy and sell orders of traders are matched to counterparties
  • ATS is not considered a national exchange but must be registered and approved by the SEC.
  • ATSs are registered as broker-dealers and not exchanges.

Regulation ATS Explained

The regulatory framework of ATS is established by Regulation ATS as provided by the SEC. Below are some of the regulatory frameworks;

  • An ATS is permitted to operate if it meets the definition of a national exchange.
  • An ATS under the Exchange Act Rule 3a1-1(a) is exempted from registering as an exchange.
  • ATSs are required to comply with Rules 300-303 of Regulation ATS.
  • An ATS must report its books and records.

However, additional regulations have been added to Regulation ATS by the SEC to enhance the operational transparency of these platforms. One of the regulations is a mandatory requirement of ATS to file a comprehensive public disclosure.

alternative trading system

Was this article helpful?

Yes
No

Related Articles

  • Cox, Ross, & Rubinstein Option-Pricing Model - Explained
  • Regulation T - Explained
  • Philadelphia Stock Exchange - Explained
  • Ask (Securities Trading) - Explained



©2011-2021. The Business Professor, LLC.
  • Privacy

  • Questions

Definition by Author

0
0
Expand