US-based market operator BATS Global Markets has filed a proposal with regulators to establish a market making programme designed to support its recently-launched primary listings business.
BATS’ competitive liquidity provider (CLP) service is currently awaiting sign off by US watchdog the Securities and Exchange Commission (SEC) and is a rewards-based programme designed to stimulate liquidity and create tighter spreads for stocks listed on its exchange.
Each liquidity provider in the scheme must be a registered market maker on BATS and also register to be a CLP for a specific listing. There is no limit to the number of CLPs that can be registered in a corporate single listing.
Through the CLP programme, liquidity providers will compete for a daily reward by posting competitive quotes in a stock or exchange-traded products, based on their continuous daily quoted size at the national best bid/offer in the securities for which they are registered CLPs.
Additionally, for exchange-traded products, the CLP programme encourages multiple liquidity providers to participate in the launch of new instruments by splitting up the initial seed investment amongst multiple liquidity providers.
BATS says its CLP service will benefit all issuers, particularly those are who are often challenged by a lack of liquidity in their shares, which can make attracting larger investors difficult.
“One of the many challenges for today’s issuers is attracting liquidity to their stock, and we believe we’ve developed a unique program that addresses this very issue,” said Joe Ratterman, chairman and CEO of BATS Global Markets. “Our competitive liquidity provider programme is designed to incent market makers to dedicate their focus to providing liquidity and posting tight markets for an issuer.
BATS opened its listings business on 5 December on BZX, one of the two US stock exchanges it operates, allowing it to challenge NYSE Euronext and Nasdaq OMX for new issues.
BATS says it will aim to offer better customer service and visibility of stock ownership across the fragmented US market environment, compared to its two rivals.
As well as the CLP programme, BATS has also developed an auction system process and a surveillance solution for securities listed on its market.
In May, BATS 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.