BATS Global Markets, the Kansas-based trading venue operator, has unveiled plans to launch a US primary listings business in Q4 2011, as it seeks to further erode the dominance of exchange operators NYSE Euronext and Nasdaq OMX.
The firm, which currently accounts for around 11% of US equity trading market share, has submitted draft rules to operate a listings business to US regulator the Securities and Exchange Commission, and expects to formally file them for notice and public comment shortly.
“We believe there is a need for an alternative listing venue in today's market, which has only been heightened in recent weeks as legacy exchanges weigh different merger and acquisition strategies,” said Joe Ratterman, president and chief executive of BATS Global Markets. “In addition, market conditions have become increasingly favorable to companies looking to gain access to the capital markets so we're excited to launch our listings business later this year.”
According to a spokesperson for BATS Global Markets, its listings programme will not be targeted towards any particular company size or sector but will instead offer a viable alternative to incumbent exchanges that have lost customer focus in recent months.
“Should a merger of Nasdaq OMX and NYSE Euronext come to fruition, a competitive alternative will become all the more important to issuers,” said the spokesperson. “Some of the feedback from issuers we've spoken with is that service to individual listing customers is an area in which our competitors have lost some focus.”
Nasdaq OMX is rumoured to be exploring options for launching a rival bid to German market operator Deutsche Börse's proposed takeover of NYSE Euronext.
BATS has said it plans to underpin its listings business with the same technological and pricing benefits it offers via its US exchanges and multilateral trading facility (MTF), BATS Europe.
“Our competitors' listing fees scale to the size of the company or shares outstanding,” added the spokesperson. “We're considering a more straightforward approach that would include a flat structure. We won't necessarily be the least expensive, but we think a single, flat fee structure would be quite attractive. We also see great potential in the area of support and services for an offering that includes automated tools and analytics, as well as knowledge support and market structure education for customers.”
In January 2007, BATS' then a US electronic communications network – which has since converted into a fully-fledged exchange – launched a pricing promotion to help it build a critical mass of market share. The promotion was a success, helping BATS to reach a 9% share of Nasdaq-listed stocks just three days into the promotion. The firm's European MTF has also launched a number of similar price promotions targeting specific markets since its launch in October 2008.
BATS' US primary listing plans come amid a raft of new initiatives between trading venue operators to diversify their businesses following a continuing reduction of the profits that can be made from cash equities.
The London Stock Exchange (LSE) emphasised its ambition to become one of the leading listings venues for natural resources, mining, energy and clean technology companies in its merger announcement with Canadian exchange group TMX. The LSE has also confirmed that it is seeking partnerships with around five other exchanges to create an international board that would give investors the ability to trade foreign stocks from London.
NYSE Euronext is also seeking listings for NYSE Euronext London, a new market for international companies that want to list in London. NYSE Euronext London is intended to challenge the LSE's International Board, its existing platform that allows members to trade stocks from foreign markets via depository receipts.
BATS Global Markets hopes to receive approval from the UK's financial regulator and competition watchdog to acquire MTF Chi-X Europe in the coming month, which it plans to merge with BATS Europe.