BATS competitive liquidity programme gains SEC approval

US market operator BATS Global Markets will launch a competitive liquidity provider programme after winning Securities and Exchange Commission approval.

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US market operator BATS Global Markets will launch a competitive liquidity provider (CLP) programme after winning Securities and Exchange Commission (SEC) approval.

The BATS CLP incentive scheme will pit market makers against each other, competing for a daily reward by posting competitive quotes in a stock or exchange traded product (ETP). CLPs will be rewarded for continuous daily quoted size at the national best bid/offer in the securities for which they register as CLPs.

Each liquidity provider must register and be approved by BATS to be both a market maker and a CLP for a listing. There is no limit to the number of CLPs that can be registered in each corporate listing.

“As we grow our listings business, we are creating new and unique ways to make the markets better for today’s issuer and enhance competition in the exchange listings business,” said Joe Ratterman, chairman and CEO of BATS Global Markets.

BATS said the CLP programme would particularly benefit small- and mid-cap companies, which are often challenged by a lack of liquidity in their stock, making attracting larger investors tough.

Rather than designating a single liquidity provider for ETPs, the scheme will encourage multiple liquidity providers to participate in the launch of an ETP public offering.

The venue operator opened its listings business on 5 December on BZX, one of the two US stock exchanges it operates, in a bid to challenge NYSE Euronext and Nasdaq OMX for new issues.

BATS has also developed an auction system process and a surveillance solution for securities listed on its market.

The maiden primary listing on BZX – the iShares MSCI Norway Capped Investable Market Index Fund – launched 24 January and traded 4,803 shares on its first day.

In May, the company filed plans with the SEC for its own initial public offering, which would see the exchange become the first issuer to be listed on its own venue.

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