Alternative Trading System (ATS) is a registered U.S. trading venue that matches and executes orders for securities outside traditional exchanges. It is typically operated by broker-dealers and regulated under Regulation ATS (Reg ATS) by the Securities and Exchange Commission (SEC).
Broker-dealers route client orders to ATSs to access additional liquidity or to pursue different execution characteristics. Some ATSs display public quotes (lit venues), while others operate as dark pools where a portion of order information is not publicly visible. Trades executed at ATSs are reported to market data feeds and, depending on the venue, may appear in the consolidated tape used for price discovery.
ATSs expand the set of venues where orders can be matched, influencing liquidity provision and price formation. They can specialize in particular security types, sizes, or trading styles, and they interact with traditional exchanges as part of a broader market ecosystem. Regulators require transparency and reporting to monitor activity and guard investor protection, while market participants use ATSs to diversify execution options and potentially reduce market impact.
Example: A broker routes a block order to an ATS to seek additional liquidity; if a matching order is found, a trade is executed and reported to market data feeds.
Electronic Communication Network (ECN) · Dark Pool · Regulation ATS · Broker-dealer · National Market System (NMS) · Securities and Exchange Commission (SEC)