Alternative Trading System

Abstract

The Alternative trading system has the same objective as a stock exchange. Nevertheless, there are dissimilarities also. While stock exchanges follow stringent norms, the ATS is less strict. The article below indicates the various features of the alternative trading system.

The SEC or the Securities Exchange Commission approves alternative trading systems or ATS as venues or platforms for trading non-exchange financial instruments. ATS are important because they form an important platform for providing alternative liquidity means. In fact, ATS may also be referred to as a platform, which despite not behaving as an exchange bring together the sellers as well as the buyers for trading on a common platform, which may evoke a trading contract.

Characteristics of Alternative Trading System or ATS:

The Alternative trading system faces less stringent norms as compared to stock exchanges.

Trading pertaining to only standardized securities take place in the ATS.

Trading in such platforms take place in a specific locality and is limited in time.

One prerequisite for trading in such trading system is that individuals or institutions not affiliated to any stock exchange are entitled to trade their goods in ATS or Alternative Trading Systems.

Similarities and differences with other stock exchanges:

There is a common aspect between both the Alternative Trading systems as well as the stock exchanges. Both these platforms serve as a meeting point for sellers as well as the bears.

However, there are dissimilarities too. The Private Law contracts govern the transactions, which take place between buyers as well as sellers in trading non-exchangeable goods. On the other hand, Stock Exchange Law governs the financial instruments, which trade on the stock exchanges. As mentioned above, the ATS is subjected to less stringency.

Significance of ATS:

The ATS helps in creating added value pertaining to the investments made by the traders.

Transaction costs are reduced.

Real-time execution of trades takes place.

Provides access to the equity markets.

It offers, “Customized market models”.