Mosaic Platforms has launched Mosaic ATS, a new alternative trading system for U.S. equities built around a compatibility-based interaction model that uses a proprietary framework called MERIT to determine how counterparties match, rather than relying solely on price and time priority. The platform evaluates trading behavior and workflow context to influence order interactions, reflecting ongoing industry efforts to address execution outcomes beyond the initial trade match. The system is now live and available to broker-dealers.
Shift From Matching to Post-Trade Outcomes
The Mosaic ATS model focuses on what happens after trades are executed, an area that has gained attention as market participants examine factors such as adverse selection, information leakage, and execution quality over time. Traditional venues prioritize matching orders based on price and availability, but do not account for the impact of those matches on subsequent price movements or trading performance. Mosaic said its system is designed to incorporate these considerations into the matching process itself.
John Cosenza, Co-Chief Executive Officer of Mosaic Platforms, stated: "Market centers have been engineered to optimize the match – but trading performance lives in the minutes and hours that follow. This disconnect between system design and trading intent is a non-trivial market blind spot. And as higher quality liquidity is increasingly internalized out of the broader market, rising levels of exhaust amplify this challenge. The industry has done a great job in improving child order markouts and quote stability, which we view as the start point to tackling higher value parent order problems. Our mission is to curate higher quality interactions with minimal footprint for the broader market."
The reference to internalization and market impact points to structural changes in equity markets, where a growing share of liquidity is handled off-exchange, affecting how trades influence price formation.
MERIT System and Compatibility Scoring
Mosaic ATS segments participants into two categories: investors and risk providers. The MERIT system evaluates compatibility between these counterparties by assessing how trading activity affects them, with the aim of reducing negative outcomes such as price slippage or signaling effects. Orders are matched based on this compatibility measure, rather than solely on price-time priority, creating a more selective matching process where interactions are filtered according to expected execution quality.
Joe Wald, Co-Chief Executive Officer of Mosaic Platforms, commented: "Matching models optimize price and time availability – without accounting for what happens next. MERIT changes that and allows investors and risk providers to share meaningful value, driving two-sided network effects and compounding performance benefits. We believe this represents the next evolution for market centers."
The introduction of a scoring-based model represents a departure from standard matching engines, which typically treat all orders equally within the same price level. MERIT introduces an additional layer that ranks or filters interactions based on compatibility assessment.
Market Structure Implications
The launch of Mosaic ATS highlights ongoing experimentation in market structure, particularly in areas related to execution quality and liquidity segmentation. As trading strategies become more complex, participants are placing greater emphasis on how trades are executed, not just whether they are filled.
Compatibility-based models may offer advantages in reducing certain types of market impact, but they also introduce questions about transparency and access. The criteria used to determine compatibility can affect which orders are matched and under what conditions. The approach also interacts with existing trends such as internalization and alternative trading systems, which already segment liquidity in different ways. Adding a scoring layer could further differentiate how liquidity is accessed and distributed across venues.
For broker-dealers and institutional participants, the effectiveness of such a model will depend on whether it improves execution outcomes in practice. Adoption will likely depend on measurable improvements in metrics such as slippage, fill quality, and post-trade price movement.
