Alternative Trading System

An Alternative Trading System (ATS) is a non-exchange trading venue that matches buyers and sellers of securities, often offering different rules, pricing structures, or trading hours compared to traditional stock exchanges. ATSs are used by institutional investors and high-frequency traders to execute large orders without impacting the public markets, providing more anonymity and potentially better pricing. ATSs include electronic communication networks (ECNs), dark pools, and crossing networks. They are regulated by the Securities and Exchange Commission (SEC) but operate under a lighter regulatory framework than formal exchanges like the NYSE or Nasdaq.

Example

A hedge fund might use a dark pool, a type of ATS, to buy a large block of shares without revealing its trading intentions to the broader market, thereby minimizing market impact.