Eyeing Options, Listings, BATS Looks To Expand
Exchange status opens doors, says CEO Ratterman
February 2, 2009
Since transitioning from an electronic communications network in November amid record volatility, BATS Exchange has set its sights on increasing its market share and expanding its global presence, as well as some of the opportunities opened up by its new status.
Known for fast and efficient technology, BATS launched in 2006, quickly growing into the third-largest U.S. equities platform. In October, the company opened a venue in Europe that utilizes that same technology. Now the upstart exchange is looking into adding an asset class and entering the listings business.
"Today we offer U.S.-listed cash securities, along with our BATS Europe multilateral trading facility, but we are giving serious consideration to equity options and have put some initial thought into what a listings offering might need," says Joe Ratterman, chairman, president and CEO of Kansas City-based BATS.
Another possibility, says BATS spokesperson Randy Williams, is the introduction of a "second quote," though he stresses that those discussions are in very early stages. Nasdaq OMX Group rolled out a second platform last month, giving users a choice of fee and execution structures, and the New York Stock Exchange and Direct Edge also offer multiple models.
In response to surging market data volumes, BATS, which has made its market data offerings available for free since it began operations, released the beta version of Multicast Pitch. The new service, says BATS, provides as much as a 50 percent reduction in bandwidth compared to Pitch, a point-to-point depth-of-book data feed. "A multicast data feed will maintain--and complement--the sustained low-latency trading experience of members and market data recipients under all market conditions," according to BATS chief operating officer Chris Isaacson.
In an interview with Securities Industry News, Ratterman, who joined BATS as COO before taking the top spot in June 2007, discussed Multicast Pitch, BATS Europe and other current and future growth initiatives. Ratterman, VP of business development at black-box trading firm Tradebot Systems in 2004 and 2005, has also been chief information officer at Lab One, a health screening and clinical diagnostic testing company, and spent 12 years as CTO of Bridge Information Systems.
In November--your first month as an exchange--BATS accounted for 10.37 percent of U.S. execution volume, compared to 6.9 percent in the same month last year. Where did the increase come from? It's all organic growth that came from our competitors. We've been adding subscribers and functionality on a continual basis and recognizing a 30 to 50 basis point increase in overall market share every month for the last 18 months or so. That's just natural growth of the market that's bringing on customers and offering more than our competitors.
How have volatility and the current market conditions affected your business? We've certainly benefited from the industry's increased desire to trade. The volatility has created volume and we've handled the volume exceedingly well. We think when volatility was at its highest--last September, October and November--BATS Exchange was able to shine, with its systems handling the load with no outages. The same can't necessarily be said for all of our competitors. So we were happy to have a very reliable, robust system in place well ahead of the tsunami of volume that hit the markets.
