BATS Global Markets

From MarketsWiki
Jump to: navigation, search
Not impressed? Tell us how to improve it or sign up to edit.
Bats logo.jpgBATSBATS US EquitiesBATS OptionsBATS European Equities
Bats logo.jpg

BATS Global Markets
BATS 225px.jpg
Founded 2005
Headquarters Kansas City, Missouri, U.S.
Key People Chris Concannon, CEO
Products U.S. equity trading

BATS Global Markets operates two U.S. stock exchanges, the BZX Exchange and the BYX Exchange (The BATS Exchanges), that together process about 10 percent of all U.S. equity trading daily, as well as a European exchange, BATS Chi-X Europe, which processes 23 percent of that market, and a U.S. options exchange, BATS Options.[1] BATS is based in Kansas City, Mo. and has additional offices in New York and London. Included in the BATS customer base are more than 270 broker-dealers and a broad-based ownership group of financial companies.

BATS (which is an acronym for Better Alternative Trading System) is a second-generation[2] electronic communication network (ECN) founded in June 2005 by David Cummings, owner of Tradebot Systems in Kansas City. The BATS electronic network is designed to "handle high-speed, high-volume, anonymous, algorithmic trading."[3][4] BATS launched trading on Jan. 27, 2006 and quickly became the third-largest U.S. equities market by volume as it grabbed 10 percent of United States equities markets two years after it opened for trading.[5][6] In February of 2010 BATS launched a U.S. equity options exchange, BATS Options. In November 2011, BATS Chi-X Europe was formed when the two leading pan-European multilateral trading facilities, BATS Trading Europe and Chi-X Europe, combined.

BATS merged with Direct Edge on January 31, 2014, creating the U.S.'s second largest exchange operator, ahead of NASDAQ but behind the New York Stock Exchange.[7] BATS first announced the merger plans in August of 2013 and the SEC approved the merger in January of 2014.[8] [9] [10] BATS CEO Joe Ratterman serves as CEO of the merged company.[11] In February 2014, BATS announced that it had selected Equinix as its primary data center provider for all of the BATS exchange platforms, including the Direct Edge Exchanges EDGA and EDGX. [12]


In January 2006, BATS implemented an aggressive pricing scheme that rewarded liquidity providers in an effort to entice broker-dealers to trade on BATS.[13][14]

Cummings was replaced by Joe Ratterman as CEO on July 1, 2007.[15]

In August 2008, BATS Trading Inc. received approval from the Securities and Exchange Commission to operate a stock exchange that would compete with NYSE Euronext's New York Stock Exchange and Nasdaq OMX Group Inc.'s Nasdaq Stock Market.[16]

BATS voluntarily withdrew its version of a flash order type in response to controversy and the threat of potential regulatory intervention in August 2009.

BATS received approval from the SEC to launch a U.S. equity options trading platform in January 2010, with plans to launch pending testing and industry-wide options symbology consolidation. On Feb. 26, 2010, BATS Options started trading with its first transaction taking place based on an Apple contract (APPL). The company targeted a 4-percent market share in U.S. options for 2010.

On May 13, 2011, BATS Global Markets announced it would launch an initial public offering.[17] The company had been privately held and majority owned by brokers and big banks including Getco, Wedbush, Lime, Citi, Credit Suisse, Morgan Stanley, Deutsche Bank and JPMorgan.[18]

In November 2011, the U.K. Competition Commission issued preliminary approval for the proposed $305 million BATS acquisition of Chi-X Europe.[19] The agreement was announced in February 2011.

On March 25, 2012, BATS withdrew its IPO after a technical glitch caused the bottom to fall out of its stock and affected other stocks trading on BATS as well, including Apple.[20] BATS CEO Joe Ratterman sent a letter to customers apologizing for the incident.[21][22] On March 28, 2012, Ratterman was stripped of his chairman title.[23]

On Jan. 9, 2013, BATS issued an alert to investors that computers for its two equity exchanges and one options platform allowed some trades over a period of more than four years to take place at prices inferior to the best available bid or offer, a violation of SEC regulations. [24] The problem involved about 450,000 transactions and resulted in a loss to customers of $420,360.57, the company said.[25] [26]

In August of 2013, Lehman Brothers Holdings’ estate exited its investment in BATS Global Markets, and all of Lehman's stake was bought by the private-equity firms Spectrum Equity Investors LP and TA Associates Management LP.[27] Lehman had been the second-largest Bats owner, holding a 12.6 percent of the voting rights stake in BATS. Other stakeholders are BATS’ founder Tradebot, Citigroup, Bank of America, Credit Suisse, Deutsche Bank, Wedbush, KCG (Knight Capital Group) and Morgan Stanley.[28]

In July 2014 BATS Global Markets became the world’s largest stock exchange operator for the first time, with market shares of 20.3% in U.S. equities and 21.5% in European equities.[29]

William O'Brien left BATS in July of 2014 after serving as president of BATS after its merger with Direct Edge. In August 2014 BATS entered into negotiations with U.S. regulators to settle accusations that Direct Edge gave unfair advantages to high-frequency traders. The talks came two years after the SEC began an inquiry into certain types of high frequency trading and whether they were disadvantageous to other investors.[30] O'Brien had sparred on CNBC with Michael Lewis, the author of the book "Flash Boys," which criticized firms like BATS for using high frequency trading technology.[31]

BATS Global Markets was named “Best Exchange Technology” at the 2014 Market’s Choice Awards, as voted by industry participants and the editors of Markets Media magazine, for the second consecutive year. [32]

In November 2014 a BATS filing with the state of New Jersey stated that BATS would lay off 56 employees in early 2015.[33]

In January 2015 BATS agreed to pay a record $14 million fine to the U.S. Securities and Exchange Commission to settle allegations involving Direct Edge, which it acquired in 2014. The SEC contended that the Direct Edge markets didn’t accurately disclose its order types.[34] [35]

Also in January 2015, KCG Holdings Inc. agreed to sell its institutional foreign-exchange-trading business, KCG Hotspot, to BATS Global Markets for $365 million in cash.[36]

On January 21, 2015, BATS Trading filed a petition with the SEC for more regulatory reform designed to improve the markets. The proposal called for reform that would: 1. Reduce potentially excessive incentives to provide liquidity in the most active securities and 2. Empower institutional and retail investors by providing them with more and better quality information about how their orders are handled.[37] On May 5, 2015, the Securities Industry and Financial Markets Association (SIFMA) backed BATS' proposal, saying the suggested reforms would improve market transparency.[38]

On April 16, 2015, BATS Global Markets said it would open a second options exchange that November, to be called EDGX Options. Unlike its BATS Options platform, the new exchange will operate in a pro-rata allocation model, prioritizing orders according to price. It is designed to directly compete with options exchanges run by Nasdaq OMX Group and International Securities Exchange.[39] BATS received SEC approval for EDGX in August 2015 and said the market would launch on November 2, 2015.[40]

Also in April 2015, BATS hired Laura Morrison, a former senior NYSE officer, as a senior vice president and global head of exchange-traded products.

On October 1, 2015, BATS launched the BATS ETF Marketplace, which will pay ETF providers as much as $400,000 a year to list on BATS. Payments will vary depending on average daily volume.[41]


On June 30, 2014 BATS Global Markets unveiled BATS One Feed, a product that provides market participants real-time market data across all four equity exchanges operated by BATS. One Feed will be available starting Aug. 1, 2014, pending a filing with the Securities and Exchange Commission.[42]

Volume and Market Share

Year Total Annual Volume Percent Change
2014 201,985,667 33.0%
2013 151,814,889 15.8%
2012 130,624,660 (-)11.9%
2011 148,338,460 490.9%
2010 25,103,245 --

In 2012 the Average Daily Matched Volume in equities traded on the BATS Exchanges was 712.9 million shares. Matched market share was 11.9%. Average Daily Matched Volume for 2012 in equity options on BATS Options was 538,725 contracts. Matched market share was 3.5% The combined total notional value traded in European equities at BATS Chi-X Europe was €112.2 billion. Combined average daily notional value was €5.9 billion. Overall European Market Share in 2012 was 23.7%.[43]

Key People


  1. BATS September 2013 Volume. BATS.
  2. Trading Upstart BATS Tops 1 Billion Volume Mark.
  3. Merrill Buys BATS Trading Stake.
  4. New ATSs Arise to Fill a Void. Wall Street & Technology.
  5. BATS Trading's Exchange Application is Open to Public. Kansas City Business Journal.
  6. Upstart Financial Firm Bats is Challenging NYSE, Nasdaq. Arizona Republic.
  7. A message from Joe and Bill. BATS Global Markets.
  8. U.S. regulator approves merger of BATS and Direct Edge exchanges. Reuters.
  9. SEC Approves BATS-Direct Edge Merger. The Wall Street Journal.
  10. BATS Global Markets and Direct Edge Agree to Merge. BATS and Direct Edge.
  11. BATS Global Markets Buys Direct Edge. ABC News.
  12. BATS Global Markets Selects Equinix’s Secaucus Data Center for BATS and Direct Edge Exchanges. BATS Global Markets.
  13. Swinging At Nasdaq.
  14. BATS Trading Considers London Move. Reuters.
  15. BATS Trading Promotes Executive to COO. Kansas City Business Journal.
  16. SEC Approves BATS Exchange. The Wall Street Journal.
  17. Bats Files for IPO as Exchange Seeks Currency Amid Deals. Bloomberg.
  18. BATS Exchange to launch IPO service. Financial Times.
  19. BATS Cleared to Buy Chi-X Europe. WSJ.
  20. BATS Initial Public Tease: Nine Seconds of Free Fall. The Wall Street Journal.
  21. A Message From BATS CEO Joe Ratterman (PDF). BATS.
  22. Bats CEO Scuttled IPO on Potential for Erratic Trading. Bloomberg.
  23. BATS chief executive stripped of chairman title. CNN Money.
  24. SEC effectiveness questioned after BATS error. MarketWatch.
  25. BATS: Yes, We Have No CIO. The Wall Street Journal.
  26. Bats Blaming Market Rules as Call of Overhaul Grow. Bloomberg.
  27. Lehman Exits Bats Global Stake Through Sale to Spectrum, TA. The Washington Post.
  28. BATS Attracts 2 Private Equity Investors. Wall Street & Technology.
  29. BATS Global Markets Becomes Largest Equities Trading Venue in July. Forex Magnates.
  30. Bats Said in SEC Settlement Talks Over High-Speed-Trading Perks. Bloomberg.
  31. Bats President Who Rebuked Michael Lewis Leaves Exchange. Bloomberg.
  32. BATS press release. BATS Global Markets.
  33. BATS Global Markets to Lay Off 56 Employees. The Wall Street Journal.
  34. Bats Pays $14 Million Settling Claims Markets Obscured Rules. Bloomberg.
  35. SEC Closes Order Type Cases: No Action Against BATS, Direct Edge Settles. Traders Magazine.
  36. KCG to Sell Institutional Forex Trading Business to BATS. The Wall Street Journal.
  37. BATS Files Market Structure Reform Petition with SEC. Traders Magazine.
  38. SIFMA backs BATS' market reform proposal. Reuters.
  39. BATS Launches Options Market, Hires Senior NYSE Officer. The Wall Street Journal.
  40. BATS Receives SEC Approval to Launch EDGX Options Market. BATS.
  41. BATS Will Offer to Pay Companies to List ETFs on Exchange. The Wall Street Journal.
  42. BATS to launch BATS One Feed. Wall Street & Technology.
  43. BATS Global Markets press release. BATS Global Markets.