New research from research and consulting business TABB Group says the pace on innovation among alternative trading systems (ATS) is befuddling US market participants.
Competition is fierce among ATSs in the US equity markets, which number more than 40, alongside a dozen exchanges. This creates significant liquidity fragmentation, which can add to trading costs, but it can also lead to confusion among potential users when ATSs are regularly tweaking matching logic to increase market share. A lack of transparency is further compounded by the fact that ATS operational filings are not currently made public.
In a new research report, ‘US equity market structure: ATS matching logic’, senior research analyst Sayena Mostowfi gives two reasons for hope to those who find it hard to keep track of how different ATSs match trades.
First, her report provides attributed information from 30 ATS operators about matching logic, counterparty blocking, price improvement, minimum fills, order types, private sessions and other operational details. Second, she predicts the first ever net decline in ATSs to 39 in 2014.
“While keeping up with the changes would be easier if ATS operational filings were made public, our goal in this report is to create a level playing field of understanding among industry participants. As such, TABB is a strong advocate for further ATS transparency,” said Mostowfi.
The report also draws on “lengthy” conversations with firms holding 35 ATS registrations.