What are alternative trading systems?

Alternative trading systems are systems used to trade in securities. They are approved by the Securities and Exchange Commission, but operate outside traditional stock exchanges. According to the ATS regulation of the Securities and Stock Exchange Commission, the alternative trading system "Any organization, association, person, group of persons or system that represents, maintains, or provides marketplace or facilities for buyers and sellers of securities, or for other securities that are commonly carried out by stock exchange."

Electronic communication network (ECN) is an alternative trading system for stock and currency. ECN is used for active trading, while the trading system corresponds to ordering and selling orders. Orders that cannot be compared are displayed so that the stakeholders can be submitted by the corresponding orders. Individuals or brokers can subscribe to the electronic communication network. Instinet is the first largest electronic communicationnetwork.

Alternative trading Systems are useful for trading between markets because shares listed on other stock exchange such as the New York Stock Exchange (NYSE) or NASDAQ can be traded for electronic communication networks. The costs of trading on an alternative trading system tend to be lower because trades are carried out electronically. More people have access to the market through alternative business systems than through a centralized market such as NYSE. This means that the prices of securities traded for alternative trading systems will be theoretically more representative for their true value, because the free market forces of supply and demand are unlimited.

If an institutional investor wants to buy or sell a large amount of specific security, using Crossing Network, the type of alternative trading system, can be more convenient than thoroughAdministration. Buying or selling a large block of shares on the traditional stock exchange can often move the price of this security. Trading with a cross network that corresponds to orders without directing via an exchange or electronic communication network will not do this, because orders of purchasing and sales are assigned and carried out anonymously. These alternative trading systems do not have the characteristics of offering price up or down as centralized markets do.

Another type of alternative trading system is the call market. On the call market, many orders are grouped together. Once the orders have reached a certain volume, the order group is made simultaneously. This increases efficiency and reduces costs.