Question of the Week: What is an alternative trading system (ATS)?

Submitted by nsscadmin on Wed, 07/14/2021 - 09:00

The term alternative trading system (ATS) is used in Canada and the United States to refer to an automated trading system used to match orders from buyers and sellers of securities by using predetermined and established methods or rules. They are privately owned computer networks that match together buyers and sellers outside of regular exchanges. In Europe and other parts of the world an ATS is called a multilateral trading facility.

An ATS is similar to an exchange, but to operate in Canada an ATS must be registered as an investment dealer and become a member of the Investment Industry Regulatory Organization of Canada (IIROC). An ATS only offers trading in securities that are already listed on an exchange, but may offer a wider range of trading options and hours than the listing exchange.

Unlike exchanges, some ATSs do not provide public pre-trade information about the buy and sell orders on the ATS for a particular security; these are referred to as “dark” markets. Some institutional investors may use such an ATS to facilitate trades of large blocks of securities to reduce the effect large public trades can have on the price of a security. All transactions on ATSs are monitored by IIROC in real time and are publicly disclosed after the trade is concluded.

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