Pan-European multilateral trading facility (MTF) BATS Chi-X Europe has received its Recognised Investment Exchange (RIE) licence from UK regulator the Financial Conduct Authority (FCA), giving it greater power to challenge Europe’s primary markets and potentially drive down listing costs.
BATS Chi-X Europe, the region’s largest equities trading venue by value traded, will adopt the RIE status from 20 May, which means institutional investors and retail brokers governed by mandates that restrict trading activity to RIE venues will be able to trade European equities via BATS Chi-X Europe.
The RIE status will also let the venue operate a market for primary listings, after the UK’s Office of Fair Trading and FCA signed off on the application.
BATS Chi-X Europe will be able to issue primary listings for European firms if they meet regulatory standards set by their national regulator and where applicable the FCA. As such, BATS Chi-X Europe could further extend its market share in the region. Companies listing on BATS Chi-X Europe will be traded across the venues two lit and two dark order books.
“With FCA approval of our RIE application, we will be even better positioned to support the vision of a borderless European capital market and to compete in other areas, such as primary listings,” said Mark Hemsley, CEO of BATS Chi-X Europe, owned by US exchange operator BATS Global Markets.
“Our RIE status also enables a broader range of retail investors and buy-side firms to connect to our market and enjoy the benefits of competition that MiFID allowed, including trading venue choice, lower fees and improved service and technology,” he said.
The UK’s incumbent primary exchange, the London Stock Exchange (LSE), will be under greater pressure to protect its market share as its listings business – traditionally a vital element separating MTFs from exchange – faces increased competition.
In April, BATS Chi-X Europe etched 16.78% of equities traded in Europe during April with €125.06 billion, compared to the LSE’s 11.65% with €86.83 billion, according to data from Thomson Reuters Equity Market Share Reporter.
“As a rigorously regulated MTF, we made considerable investment in risk management, market surveillance, and regulatory tools and resources. This investment will continue with our RIE status, as we further enhance our technology, products and services,” Hemsley added.
BATS Chi-X Europe was formed in 2011 after BATS Europe acquired Chi-X Europe. The latter was initially in 2007 to take advantage of impending MiFID rules which granted competition among Europe’s equities trading venues.