Crossing Network
An electronic system that matches large buy and sell orders internally without routing them to public exchanges.
What is Crossing Network?
A crossing network is an alternative trading system (ATS) that allows institutional investors to match large buy and sell orders internally—away from public exchanges—to minimize market impact and reduce transaction costs. Orders are matched at a reference price, typically the midpoint of the national best bid and offer (NBBO), so neither side pays the bid-ask spread. Crossing networks are particularly valuable for executing block trades in liquid stocks where a large order routed to a public exchange could move the price significantly before it fills. Well-known crossing networks include ITG POSIT and Liquidnet. They operate under SEC Regulation ATS and must report trades to the consolidated tape. A key limitation is that crossing networks only fill orders when matching counterparts exist—unmatched orders must be routed elsewhere.
Example
A pension fund wants to sell 2 million shares of a mid-cap stock. Routing this order directly to Nasdaq would likely push the price down as the market absorbs the large sell order. Instead, the fund's broker routes it to a crossing network, where it matches with a mutual fund also looking to buy 2 million shares—both sides trade at the midpoint price with zero market impact.
Source: SEC — Regulation ATS