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Business models often evolve over time because of changes in the market and the introduction of innovative technology, resulting in the emergence of new, exciting trends. Alternative Trading Systems (ATSs), an interesting business model that is gaining popularity within the finance industry.
What is an ATS? An ATS refers to a U.S. Securities and Exchange Commission (SEC)-regulated electronic trading system. ATS platforms match orders for buyers and sellers of securities and are typically not as highly regulated as exchanges. Examples of ATSs include dark pools and electronic communication networks (ECNs). Globally, there are 57 alternative trading systems companies.
ATSs play an important role in public markets. They function as an alternative to traditional exchanges in terms of access to market liquidity and the speed in which an asset can be sold for goods or services. These platforms are particularly useful for those conducting large quantities of trading, such as institutional investors and professional traders, since the skewing of market price can be avoided.
Examples of ATSs ECNs
ECNs are a type of ATS that allow individual traders and major brokerages to trade securities directly without relying on a middleman. This system enables traders to conduct trades easily from different geographical areas.
Traders can conduct trades outside the traditional trading hours associated with security exchanges, meaning traders can make trades based on after-hours news. An ECN generates a profit by charging a fee for each transaction through commissions and access fees.
Dark Pools
Dark pools are ATSs that enable their users to place orders without publicly displaying the price and size of their orders to other participants in the dark pool. As a result, dark pools are sometimes considered unfavorable since trades are done out of the public eye. However, they serve a purpose by allowing larger trades to proceed without affecting the wider market.
Dark pools were created in order to facilitate block trading by institutional investors who preferred not to impact the markets with their large orders and obtain adverse prices for their trades.
Crossing Networks
Similar to dark pools, crossing networks bypass public channels, with anonymity for the buying or selling account. As the details of the trade are not relayed through public channels, the security price is not affected and does not appear on the order books.
Broadly speaking, a crossing network has a set membership. When a security is put up for sale, the seller can allow any member to buy it, or they may restrict it to a certain sub-group within the network.
Call Markets
Call markets are a type of ATS in which bids and offers are matched up with one another and aggregated and then executed at predetermined intervals at a best-matched price. Auctioneers are an important stakeholder in call markets. They are responsible for matching the supply and demand for a traded security before arriving at an equilibrium price.
What Distinguishes the INX ATS From Others? ATS have long provided liquidity to capital markets. However, with the growing popularity of digital securities, a new generation of ATS platform is enabling secondary markets to sell and buy tokenized digital securities.
A leader amongst these platforms is INX — an ATS that brings about financing potential beyond traditional markets and unlocks secondary liquidity and value for investors. The key attribute that distinguishes INX ATS from other ATS is the INX Crypto Trading Platform.
Unlike many other ATSs, INX offers crypto trading in a fully regulated platform. When using it, investors can easily and efficiently transfer, list and trade a variety of digital securities.
INX aims to be the primary trading platform for registered digital securities where issuers can list and investors can trade digital securities safely. The organization is already thriving, with the support of names including and not limited to: Barclays (LON:BARC) (NYSE: BCS), Morgan Stanley (NYSE: NYSE:MS), JPMorgan Chase & Co. (NYSE: NYSE:JPM) and UBS Group (NYSE: UBS). As the demand for new generation ATS grows in the near future, it is likely that INX emerges as the leading ATS that bridges institutions to the world of cryptocurrency.
This post contains sponsored advertising content. This content is for informational purposes only and not intended to be investing advice.
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