{
  "id": "RL30195",
  "type": "CRS Report",
  "typeId": "REPORTS",
  "number": "RL30195",
  "active": false,
  "source": "EveryCRSReport.com",
  "versions": [
    {
      "source": "EveryCRSReport.com",
      "id": 105395,
      "date": "1999-05-27",
      "retrieved": "2016-05-24T20:44:53.765941",
      "title": "Alternative Trading Systems: Will Computers Replace Stock Exchanges?",
      "summary": "Recently, the retired head of a large investment bank reflected on the great changes he had seen\non\nWall Street over his long career. The deregulation of commissions and the shift from partnerships\nto public ownership were key events, but the changes brought by electronic technology were \"a\nrevolution\" that, although still in the early stages, \"superseded the others infinitely.\" \n Perhaps the most visible aspect of this electronic transformation has been the rise of Internet\ntrading by small investors. Another change, however, although less publicized, may have a much\ngreater impact on the way stocks are traded. This is the development of \"alternative trading systems\"\n(ATSs), computer systems that match buyers and sellers of stocks and execute transactions without\nthe services of traditional brokers or exchanges. Benefits to investors of \"cutting out the\nmiddleman\" include significantly lower trading costs and better information about market conditions\nand prices. In the long run, competition between ATSs and traditional markets may lower the cost\nof capital for business.\n However, the rise of the ATS raises questions for market oversight. The traditional stock\nexchange is not just a trading mechanism: under U.S. securities law, it is also a regulator. Exchanges\nregistered with the Securities and Exchange Commission (SEC) are required to make and enforce\nrules against fraud and manipulation, to treat all participants fairly, and to act in the public interest. \nUp to now, ATSs have not been required to register as exchanges their legal status has been as\nbroker/dealers. Accordingly, there have been concerns about possible gaps in investor protection,\nmarket integrity and stability, and the absence of regulatory redress for problems that may arise in\nATS trading.\n In December 1998, the SEC adopted rules concerning the regulation of ATSs. An ATS now\nhas the choice of whether to register as an exchange or to continue to be regulated as a broker/dealer\nsubject to a new Regulation ATS, which subjects an ATS to an increasing level of exchange-like\nregulation as its trading volume rises. One of the largest ATSs, Island ECN, has indicated that it will\napply for registration as an exchange. Many of the largest securities firms, computer companies, and\nfinancial data providers have announced plans to launch an ATS. \n The House Banking Committee's Subcommittee on Capital Markets, Securities, and\nGovernment-Sponsored Enterprises held a hearing on March 25, 1999 on technology and the\nfinancial markets. Several witnesses addressed ATS-related issues. No current legislation is\npending, but the subject is an important one for congressional and regulatory oversight.\n This report presents background information on the ATS markets and on the new SEC rules. \nIt will not be updated regularly barring significant legislative or marketplace developments.",
      "type": "CRS Report",
      "typeId": "REPORTS",
      "active": false,
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      "topics": []
    }
  ],
  "topics": [
    "Economic Policy"
  ]
}