what is an alternative trading system ats 
an alternative trading system ats is a trading venue that is more loosely regulated than an exchange ats platforms are often used to match large buy and sell orders among their subscribers the most widely used type of ats in the united states is an electronic communication network ecn a computerized system that automatically matches buy and sell orders for securities in the market understanding an alternative trading system ats atss account for much of the liquidity found in publicly traded issues worldwide they are known as multilateral trading facilities in europe ecns cross networks and call networks most atss are registered as broker dealers rather than exchanges and focus on finding counterparties for transactions unlike some national exchanges atss do not set rules governing the conduct of subscribers or discipline subscribers other than by excluding them from trading they are important in providing alternative means to access liquidity institutional investors may use an ats to find counterparties for transactions instead of trading large blocks of shares on national stock exchanges these actions may be designed to conceal trading from public view since ats transactions do not appear on national exchange order books the benefit of using an ats to execute such orders is that it reduces the domino effect that large trades might have on the price of an equity alternative trading system ats is the terminology used in the u s and canada in europe they are known as multilateral trading facilities criticisms of alternative trading systems atss these trading venues must be approved by the sec regulators have stepped up enforcement actions against atss for infractions such as trading against customer order flow or making use of confidential customer trading information these violations may be more common in atss than in national exchanges because atss face fewer regulations 1a hedge fund interested in building a large position in a company may use an ats to prevent other investors from buying in advance atss used for these purposes may be referred to as dark pools dark pools entail trading on an ats by institutional orders executed on private exchanges information about these transactions is mostly unavailable to the public which is why they are called dark the bulk of dark pool liquidity is created by block trades facilitated away from the central stock market exchanges and conducted by institutional investors primarily investment banks although they are legal dark pools operate with little transparency as a result dark pools along with high frequency trading hft are oft criticized by those in the finance industry some traders believe that these elements convey an unfair advantage to certain players in the stock market regulation of alternative trading systems atss sec regulation ats established a regulatory framework for atss an ats meets the definition of an exchange under federal securities laws but is not required to register as a national securities exchange if the ats operates under the exemption provided under exchange act rule 3a1 1 a to operate under this exemption an ats must comply with the requirements in rules 300 303 of regulation ats 2to comply with regulation ats an ats must register as a broker dealer and file an initial operation report with the commission on form ats before beginning operations an ats must file amendments to form ats to provide notice of any changes to its operations and must file a cessation of operation report on form ats if it closes the requirements for filing reports using form ats are in rule 301 b 2 of regulation ats these requirements include mandated reporting of books and records 3there have been moves to make ats more transparent for example the sec amended regulation ats to enhance operational transparency for such systems in 2018 among other things this entails filing detailed public disclosures to inform the general public about potential conflicts of interest and risks of information leakage atss are also required to have written safeguards and procedures to protect subscribers trading information 4the sec formally defines an alternative trading system as any organization association person group of persons or systems 1 that constitutes maintains or provides a marketplace or facilities for bringing together purchasers and sellers of securities or for otherwise performing with respect to securities the functions commonly performed by a stock exchange within the meaning of rule 3b 16 under the exchange act and 2 that does not i set rules governing the conduct of subscribers other than the conduct of such subscribers trading on such organization association person group of persons or system or ii discipline subscribers other than by exclusion from trading 2