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Understanding the Legal Definition of Alternative Trading System
Definition & Meaning
An alternative trading system (ATS) is a type of trading platform that operates outside traditional stock exchanges. It is a registered broker or dealer that facilitates the buying and selling of securities, similar to an exchange, but without setting rules for subscriber conduct beyond their trading activities. ATSs are designed to provide a more flexible trading environment, allowing for various trading strategies and methods.
Table of content
Legal Use & context
Alternative trading systems are primarily used in the securities market. They are governed by the Securities Exchange Act of 1934 and are subject to oversight by the Securities and Exchange Commission (SEC). Legal practitioners may encounter ATSs in contexts involving securities regulation, compliance, and trading practices. Users may manage certain aspects of trading through legal templates provided by platforms like US Legal Forms, especially when dealing with compliance documentation.
Key legal elements
Real-world examples
Here are a couple of examples of abatement:
Example 1: A financial technology company creates an ATS to allow institutional investors to trade large blocks of securities without impacting market prices. This platform facilitates trades without setting rules on how investors should conduct their trades.
Example 2: A startup develops an ATS that specializes in trading cryptocurrencies, providing a space for digital asset transactions while complying with SEC regulations. (hypothetical example)
Relevant laws & statutes
The primary statute governing alternative trading systems is the Securities Exchange Act of 1934. Key provisions include:
Section 1a(1) defines ATS and outlines its operational criteria.
Section 15(b) details the registration requirements for brokers and dealers.
Comparison with related terms
Term
Definition
Key Differences
Exchange
A marketplace where securities are bought and sold.
Exchanges establish rules for trading and conduct; ATSs do not.
Broker-Dealer
A person or firm that buys and sells securities on behalf of clients.
ATSs are a type of broker-dealer but focus on facilitating trades without being classified as an exchange.
Common misunderstandings
What to do if this term applies to you
If you are considering using an alternative trading system, it's important to understand the regulatory framework and compliance requirements. You may want to consult legal templates available on US Legal Forms to help navigate the necessary documentation. If your situation is complex, seeking professional legal advice is recommended to ensure compliance with all applicable laws.
Find the legal form that fits your case
Browse our library of 85,000+ state-specific legal templates.
Typical fees: Varies by ATS; check specific platforms.
Jurisdiction: Regulated under federal law by the SEC.
Possible penalties: Non-compliance may result in fines or sanctions.
Key takeaways
Frequently asked questions
The main purpose of an ATS is to facilitate the buying and selling of securities in a flexible environment while adhering to regulatory requirements.
An ATS operates without setting rules for subscriber conduct beyond trading, while a stock exchange has established rules and regulations for trading activities.
While many aspects can be managed independently, consulting a legal professional is advisable for complex situations or compliance issues.