A major change in U.S. equity market structure has taken place: off-exchange trading now represents the majority of traded volume. In January, off-exchange venues accounted for 51.8% of reported volume, marking the fifth consecutive monthly record and signaling a lasting shift away from public exchanges.
This evolution reflects a movement of activity into dark pools and internalized trading at broker-dealers. These venues are not displayed on public order books, and their growing share of volume represents a structural change in how stocks are bought and sold.
The surge in off-exchange trading is closely tied to the rise of sub-dollar stocks popular with retail investors. Much of that activity is routed to large market makers and internalizers such as Citadel Securities and Virtu Financial, which handle significant flow in small-priced names. Because these trades often occur off-exchange, they alter the visible picture of liquidity and order flow on traditional exchanges.
Concerns follow this trend: when a larger portion of trading happens away from public venues, questions arise about price discovery, transparency, and overall market efficiency. Hidden liquidity can reduce the amount of information reflected in public quotes, potentially making it harder for all market participants to assess fair value.
However, the shift is not uniform across the market. Analysis by Jefferies shows that when sub-dollar stocks are excluded, off-exchange trading remains under 40% of volume. This indicates that the dominance of off-exchange venues is concentrated in certain segments, rather than being an across-the-board replacement of public exchanges.
Another notable development is the increased use of alternative trading systems (ATS) by institutional investors seeking to minimize market impact. These systems facilitate large, non-displayed block trades and other executions that avoid moving public quotes. ATS usage has expanded significantly: daily volume through these platforms reached roughly 1.7 billion shares in November, an increase of about 36% year-over-year, reflecting institutional demand for discreet execution methods.
Overall, the market’s migration toward off-exchange venues and ATS highlights competing priorities: retail access, price discovery, execution quality, and reduced market impact for large orders. Regulators, exchanges, and market participants will need to weigh these factors as they consider the implications for transparency and fairness in the equity markets. The current landscape shows a bifurcated market where public exchanges remain central for many securities while off-exchange liquidity concentrates in specific, often lower-priced, segments.