In June 2014, FINRA began its transparency initiative around over-the-counter securities and began publishing data on the activity level of registered Alternative Trading Systems (ATS). FINRA ATS Transparency Data has grown into one of the more widely used tools across the industry. The data is free of charge and firms benefit from it in a variety of ways. Some companies find the data useful with liquidity and venue analysis, while others may find value in determining the optimal strategy for routing orders to various dark venues.

FINRA data is commonly used to measure the competitive landscape. At a glance, many find that the data is effective in gauging a firm’s overall progress, including a view into the ways market events and industry forces influence trading behavior and the direction of order flow. The data is thoughtful in its presentation and appeals to various participants. At the same time, the presentation coupled with the timing of the data’s publication could alter the perception of liquidity and volume on any given venue.

FINRA ATS Transparency Data

FINRA data is a common topic in discussions about dark pool volume. Many of our subscribers track volumes closely and receive periodic updates from multiple sources. The data is consistent with respect to comparative statistics and symbols reported. In other words, ATSs are treated equally when it comes to calculating volume and market share. Although consistency is important, especially for effective presentation, it can be problematic. Drastic differences between pools could influence execution results for a variety of reasons. For instance, the Luminex subscriber base totals 124 subscribers. Our client set, by design, excludes many of today’s market participants, many of whom actively participate in other ATSs. Therefore, while Luminex total volume, in absolute terms, is small compared to other ATSs, the execution experience is entirely different.

Since our November 2015 launch, we have received many questions around our progress and volume, especially FINRA volume. Although most understand the subtleties and benefits that characterize Luminex and its constituents, the breakdown of our reported FINRA ATS volume – Tier 1 versus Tier 2 – comes as a surprise. More importantly, the perception of our volume, liquidity, and market share is often associated with statistics for Tier 1 stocks only. To obtain a more accurate view of the reported ATS volume for Luminex, Tier 1 and Tier 2, for the same time period, should be taken into consideration. (Definitions for Tier 1 and Tier 2 are below.)

For example, let’s say on Monday, a trader accesses the FINRA website for the latest ATS statistics (volume which would have occurred two weeks prior) and finds the volume statistics for all Tier 1 symbols. Tier 2 volume data for that same week is not available for another two weeks. If a firm traded a significant amount of Tier 2 volume, versus Tier 1, a trader might conclude that a venue lacks ample liquidity and choose to route away, when in fact, the information is simply not publicly available. While important reasons exist for publishing data on a two- or four-week delay, the likelihood that anyone will go back and recalculate the total volume for all pools is highly unlikely even though it is the only way to obtain a complete and accurate comparison, an unfortunate consequence of having large amounts of data.

Luminex Volume – Tier 1 & Tier 2

Collectively, the ratio between Tier 1 and Tier 2 weekly ATS volume is rather consistent. However, after taking a closer look at the combined FINRA data for Luminex, compared to all ATS volume, we found Tier 2 volume contributed a significant amount to our overall volume. Furthermore, in some cases, the Luminex average execution size of Tier 2 names was significantly higher than Tier 1. (See below)





FINRA ATS Weekly Volume – Tier 1 vs. Tier 2

ATS volume data is available for all NMS securities. Weekly volumes are published in two separate tranches of symbols (Tier 1 and Tier 2/OTC), and are released on a two-week and four-week delay respectively.

Generally speaking, Tier 1 stocks are viewed as being more heavily traded and typically responsible for approximately 60-70% of all ATS volume (chart below). The nature of Tier 1 stocks also explains why publication of trading data occurs with only a two-week delay, sooner than Tier 2. Tier 2 securities include more symbols that are less liquid, and likely, more difficult to trade. The four-week publication delay for Tier 2 symbols is designed to help prevent unnecessary information leakage because, theoretically, orders in Tier 2 names would likely take longer to complete.

Tier 1
Symbol Category NMS Stocks included in the S&P 500 Index, Russell 1000 Index, and certain ETPs
Publication Timeframe Two-week delay
Tier 2
Symbol Category NMS stocks other than Tier 1, OTC securities
Publication Timeframe Four-week delay




More Data to Come

FINRA has made significant progress in providing transparency around off exchange volume, particularly ATS volume. On April 25, 2016, FINRA furthered its transparency effort and began publishing, by member firm and security, the remaining OTC equity volume executed away from ATSs. On Monday, October 3, 2016, FINRA will publish monthly information on block-sized trades occurring on ATSs. Like many, we will continue to track the data very closely and highlight some of the more notable trends we find along the way.

Anna Ziotis Kurzrok
Market Strategy & Senior Sales
Luminex Trading & Analytics, LLC

For investment professional or institutional investor use only. Not authorized for distribution to the public as sales material.

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