The four ATS's I mentioned all became full exchanges. ARCA and INET got bought by existing exchange operators, while BATS and Direct Edge were cleared by the SEC to be exchange operators. These four all exist after a massive wave of consolidation among the ATS's from the past decade.

There are also dark pools, whose innovation is that they don't display quotes. Every large brokerage has a dark pool. I wonder if there will be consolidation there; it's anyone's guess at this point.

As for network effects, Reg NMS requires an exchange to route an order to a rival if the rival has published a better price. So network effects are less important than you might think outside the dark pools. The features that really attract market makers are things like fees and likelihood of getting a fill (ie, priority rules).

Thanks! I didn't realize that exchanges need to route orders to any other exchange with a better published price. That's a great rule. I assume that most ATS's are located within a short distance of each other.

Really helpful post. Thanks for the information.

> "I assume that most ATS's are located within a short distance of each other."

... if only. Reg NMS is a massive headache. This sort of price convergence would be better left to the arbitrageurs. Let the market deal with the light speed issues instead of trying to regulate physics.

Fascinating. Even more interesting. Thanks for the information.