An Alternative Trading System (ATS) is a non-exchange trading venue that matches buyers and sellers of financial instruments. ATSs are sometimes referred to as “dark pools” because trading activity and price quotes on these platforms are not publicly disclosed in the same way as on traditional stock exchanges. Instead, ATSs operate in a more private or “dark” manner.

Here are some key characteristics and features of Alternative Trading Systems:

1. **Operational Structure:**
– ATSs are electronic trading platforms that facilitate the buying and selling of financial instruments, such as stocks, bonds, or other securities. They operate outside of traditional stock exchanges.

2. **Dark Pools:**
– Many ATSs are known as dark pools because they provide a venue for trading large blocks of shares with minimal market impact. The lack of pre-trade transparency means that orders and quotes are not visible to the broader market.

3. **Order Matching:**
– ATSs match buy and sell orders using algorithms and other electronic trading mechanisms. Trades are executed based on predetermined rules and algorithms.

4. **Confidentiality:**
– Participants on an ATS often value confidentiality, and the lack of pre-trade and post-trade transparency can be attractive to institutional investors looking to execute large orders without revealing their intentions to the broader market.

5. **Regulation:**
– ATSs are subject to regulation by the Securities and Exchange Commission (SEC) in the United States. They must register with the SEC and comply with specific regulatory requirements.

6. **Market Impact:**
– Because ATSs often handle large trades in a more discreet manner, they can potentially reduce market impact, providing an advantage for institutional investors seeking to execute significant transactions.

7. **Liquidity:**
– ATSs contribute to overall market liquidity by providing an additional venue for trading. However, their impact on market liquidity can be complex and may depend on factors such as market conditions and the specific types of securities traded.

8. **Types of Participants:**
– Various types of participants use ATSs, including institutional investors, broker-dealers, and high-frequency trading firms.

It’s important to note that while ATSs provide benefits such as increased privacy for large trades, concerns have been raised about the potential impact on overall market transparency. Additionally, regulatory oversight is essential to ensure fair and efficient operation. Investors and market participants should be aware of the specific features and risks associated with trading on alternative trading systems.