What distinguishes an alternative trading system (ATS) from a traditional exchange?

An alternative trading system (ATS) is primarily distinguished from a traditional exchange by its ability to match buy and sell orders without the oversight typically associated with traditional exchanges. This key characteristic of ATS permits it to offer trading solutions outside the conventional exchange framework, often focusing on lesser-known or illiquid securities.

Traditional exchanges, like the New York Stock Exchange or Nasdaq, are heavily regulated entities that have specific requirements for listing securities, maintaining standards, and ensuring market integrity. Conversely, ATSs are more flexible and can operate under a different set of regulatory requirements, which can lead to more innovative trading practices and opportunities for certain participants.

The other options do not accurately represent the essential distinction between ATS and traditional exchanges. For instance, while some ATSs may engage in trading digital currencies, they are not restricted to this asset class. Additionally, ATSs do not inherently facilitate large public offerings, which is a function more closely associated with traditional exchanges. Lastly, the statement regarding ATS being regulated as an exchange is misleading, as ATSs exist in a different regulatory space compared to traditional exchanges.