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Key Takeaways
- An ATS matches securities orders under a regulatory framework distinct from a national securities exchange.
- ATS designs include non-displayed pools, displayed books and specialized matching protocols.
- NMS stock ATSs publish Form ATS-N disclosures covering their operation and access.
- The worked venue executes 18 million of 240 million shares, a 7.5% market share.
- Compare venue participation, execution prices and repeated levels to understand where liquidity trades.
What is an alternative trading system (ATS)?
An alternative trading system, or ATS, is a venue that brings together securities buyers and sellers under a regulatory framework distinct from a national securities exchange. The U.S. operator registers as a broker-dealer and follows Regulation ATS. The venue specifies its subscribers, accepted securities, order types and matching rules.
Designs include displayed books, dark pools and specialized matching protocols. For NMS stocks, Form ATS-N publicly describes the venue’s operations and access.
Formula
ATS market share = ATS reported volume / total consolidated volume × 100%- ATS reported volume is executed share volume attributed to the venue for the measurement period.
- Total consolidated volume includes reported executions across exchanges and off-exchange venues.
How is ATS market share calculated?
During one week, an ATS reports 18 million shares executed in a stock while consolidated volume is 240 million shares.
- ATS share: 18,000,000 / 240,000,000 = 0.075
- Percentage of consolidated volume: 0.075 × 100% = 7.5%
- Remaining volume across other venues: 240 million − 18 million = 222 million shares
The ATS executes 7.5% of the stock’s consolidated weekly volume. Compare that share and average execution size across venues to see where the stock’s liquidity is trading.
Use the same security and period when comparing venues. Pair share volume with trade count to calculate average execution size.
How ATS trades are matched and reported
The venue matches orders under its disclosed rules. Listed-stock ATS executions enter the applicable FINRA reporting facility and consolidated tape. Non-ATS broker-dealer trades use the off-exchange reporting framework as well.
How traders read ATS executions
Compare a fill with the bid, ask and midpoint at execution time. Then examine fill quantity, completion rate and the stock’s subsequent trading around that price.
Dark-pool flow shows reported stock executions and recurring price levels, and comparing them with options flow in the same ticker identifies the contracts and expirations attracting activity.
Limitations of ATS data
- A print is the finished trade: price, size and time, after the fact. Resting orders and the names behind them stay inside the venue, so judge the liquidity at a level by the prints that repeat there.
- Check the venue’s design before reading its prints as dark-pool flow. Displayed books, non-displayed pools and specialized protocols all register as ATSs, and an NMS stock ATS’s Form ATS-N says which one it runs.
- Measure market share per stock and per period. The worked 7.5% is one stock over one week, so rerun the ratio before comparing the venue in another name or month.
- Reach an ATS through your broker’s routing. Many ATSs admit only broker-dealers or institutional subscribers, and Form ATS-N describes who can trade on each NMS stock ATS.
Bottom line
An alternative trading system is a broker-dealer-operated venue that matches orders outside the exchanges under Regulation ATS. Read its executions as one part of a stock’s consolidated volume: measure the venue’s share over a fixed period, compare each fill with the quote at execution time, and for an NMS stock ATS, read its Form ATS-N to see how it handles orders.
Clear answers
Frequently Asked Questions
Sources and Further Reading
- SEC: Alternative Trading System List
- SEC: Regulation of NMS Stock Alternative Trading Systems
- SEC: Electronic Communication Networks and Alternative Trading Systems
How entries are sourced, calculated and updated: editorial methodology.