BATS moves in on the options market
BY GRAYDON GORDIAN – MEDILL NEWS SERVICE
Once upon a time it was considered nearly impossible to get the Securities and Exchange Commission to grant a new exchange license. Nowadays, it only takes a few months.
On Nov. 10, 2009 BATS Exchange Inc., a Lenexa, Kan.-based electronic exchange that burst onto the equities trading scene in 2005, applied for a license to open an options exchange. On Tuesday, its application was approved.
Randy Williams, vice president of global communications for BATS, said more than 30 firms hope to begin trading when the exchange opens Feb. 26.
“Banks, mid-sized brokers, proprietary trading firms,” said Williams. “They are already working through the connection process.”
When BATS’ equity trading platform launched in the middle of last decade, it didn’t take long for the company to control a significant share of the market.
“We got to 10 percent of the U.S. equities market in four years,” said Williams. “We’d love it if we could do that again.”
White Cap Trading LLC Managing Director Jamie Selway, who is both a director of BATS and formerly the chief economist of NYSE Arca, is optimistic about the new options exchange’s potential.
“It’s pretty attractive,” said Selway. “The BATS approach isn’t new, but you can assume the technology will be top notch. As good as if not better than anyone around.”
Graydon Gordian/MEDILL NEWS SERVICE
The four biggest players in the options trading market are the Chicago Board Options Exchange, NASDAQ OMX Group Inc., the New York Stock Exchange and the International Securities Exchange.
According to BATS, CBOE leads the way with 26.4 percent of the market. Two NASDAQ exchanges, PHLX and NOM, process 25.4 percent of options trading, while two New York Stock Exchange platforms, NYSE ARCA and NYSE Amex, handle 24.9 percent. With 21.5 percent of the market, the ISE has the smallest market share of the four major exchanges.
It is amidst this competitive landscape that BATS believes it can make significant inroads.
BATS isn’t content just making a move into the U.S. options market. It plans on adding a second U.S. equities exchange in the second quarter of 2010 and a U.S. listings business in the second half of this year.
Williams said, when deciding on each particular expansion, they ask themselves three questions.
“Is there room for competition in the space?” said Williams. “Are there folks who would be interested in working with us? Do we have the resources? The answer to all three is yes.”
Tags: BATS Exchange, Economy & Markets, Featured, Finance
