Venues and publishers

You may have seen other data sources refer to all trading venues as an exchange. This naming convention is often harmless, especially if you are only interested in a small set of venues that actually implement a centralized exchange model.

However, as you expand to more asset classes or markets with Databento, it becomes increasingly likely that you will encounter different venue models such as ECNs and ATSs. Since terms like exchange, ATS, and ECN have specific regulatory meanings, we refrain from conflating exchange with other trading venues.

We use the terms "trading venue" and venue interchangeably.

We use the term publisher to refer to any data provider on Databento. A publisher may also be a venue.

Info

A vast majority of US equities data consumers are receiving data disseminated by the Securities Information Processors (SIPs) —namely the Consolidated Tape Association (CTA) and the UTP Plan. The SIPs provide a consolidated view of all protected bid/ask quotes and trades from US equities trading venues. On Databento, we refer to the SIPs as publishers but not market operators.

Exchange

An exchange is a venue registered with the SEC under Section 6 of the Securities Exchange Act of 1934. The SEC lists all current exchanges registered, here.

OTC markets

OTC markets are dealer networks that trade securities that don't meet exchange listing requirements (such as "unlisted" securities) and instruments that don't trade on a formal exchange (such as bonds, ADRs, and derivatives). The Financial Industry Regulatory Authority (FINRA) regulates broker-dealers that operate in the over-the-counter (OTC) market.

ATS

An Alternative Trading System (ATS) is a non-exchange trading venue that matches buyers and sellers to counterparties for transactions. ATSs are usually regulated as broker-dealers instead of as exchanges.

ATSes meet the definition of exchange under federal securities law. They aren't required to register as a national securities exchange, as long as the ATS operates under the exemption provided under Exchange Act Rule 3a1-1(a). Since ATSes are non-exchanges, ATS transactions don't appear on national exchange order books. Some traders use this advantage to conceal trading from public view, and reduce the effect of large trades.

An ATS must be approved by the United States Securities and Exchange Commission (SEC). For a current list of SEC-recognized ATSes, see here. The equivalent term under European legislation is a multilateral trading facility (MTF). ATSes are inclusive of electronic communications networks (ECNs), cross networks, call networks, and dark pools.

ECN

ECNs are a type of alternative trading system (ATS) that trade listed stocks and other exchange-traded products outside of traditional stock exchanges. As an ATS, ECNs are required to register with the SEC as broker-dealers as well as register as members of FINRA.

ECNs are computerized systems that internally and automatically match limit orders, charging a fee for each transaction. These venues attempt to eliminate the third party's role in executing orders entered by an exchange market maker or an over-the-counter market maker. They permit such orders to be executed against in whole or in part.

Dark pools

Dark pools are a type of ATS that operate within private groups. They are private exchanges or forums for securities trading. Though their legal validity is subject to local regulations, they are popular for participants who want to disassociate their identity from market activity, and for participants who want to save money on transaction fees.