5.8. Alternative Trading Systems

An alternative trading system (ATS) is a trading network that matches buy and sell orders of its members, usually institutional traders that trade in large quantities. An ATS functions somewhat like an exchange, but only for trades between its exclusive group of subscribers. Alternative trading systems are typically registered with the SEC as broker-dealers. ECNs, whether linked or unlinked, are considered alternative trading systems.

Another type of ATS is a dark pool. A dark pool is a private trading system that allows participants to make transactions without displaying quotes to the public. Dark pool participants tend to be institutions that are making large transactions and do not want their quotations to be public because they may influence the price of the security. If