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Published on: 07/01/2008
Type of content: White Paper
Format: Adobe Acrobat (.pdf)
Length: 43
Price: FREE

Overview
Market fragmentation continues to increase as new alternative trading systems (ATSs) enter what appears to be an already overcrowded U.S. equities market. There are at least 35 potential execution venues for U.S. equities. While most of the larger venues are indeed connected, a growing segment of the execution market (i.e. dark pools) has been largely disconnected from the rest of the marketplace to date. However, things are rarely static in the U.S. securities industry, and the ATS market is no exception. Not all ATSs are made equal. Broadly speaking, there are two distinct types of execution venues in the United States, and various business models fall under those two types:

• Displayed markets:

Representing the more traditional market venues, displayed markets provide quotes, which function as the reference price for the rest of the market. There are two types of displayed markets:
- Exchanges: NYSE Group, NASDAQ, regional exchanges.
- ECNs: BATS, Direct Edge, Bloomberg TradeBook, LavaFlow, Track ECN.

• Non-displayed markets:

More popularly known as dark pools, non-displayed markets facilitate crossing of buy and sell orders without the benefit of publicly available quotes.While the lack of quotes is a common theme amongst the
various non-displayed markets, similarities typically end there. Many different types of dark pools exist today in the U.S. equities market, depending on execution methods (auto-ex versus negotiation versus blend),\ crossing times (scheduled versus continuous), profile of order flow (block orders versus retail orders versus internal prop orders versus algorithmic pass-throughs), ownership structure (independent agency versus broker/dealer owned versus consortium-led utility versus exchange-owned), and more.
- Exchange-related ATS: NASDAQ Crossing, ISE MPM, LeveL
ATS, and NYSE MatchPoint (not yet launched).
- Block trading platforms: Liquidnet, Pipeline, ITG POSIT,
BIDS, BNY ConvergEx Cross, NYFIX Millennium

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