BATS Trading springs attack on NYSE
Bats Trading, the Midwestern share trading upstart that has captured trading in about 10 per cent of Nasdaq-listed shares with its low price, high-speed system, on Monday launched a parallel attack on the NYSE Group.
The move illustrates the increasingly cut-throat nature of competition in the US cash equities markets and underscores the pressures driving the two largest exchanges, Nasdaq and NYSE, to pursue acquisitions in Europe where stock exchanges remain monopoly-like businesses.
Bats said it would extend the tariff structure used for trading in Nasdaq shares, in which investors posting firm bids are given a rebate on the tariff they pay to buy shares, to NYSE-listed stocks. That tariff is well below that charged by the NYSE, the company said.
Bats is one of the more successful efforts under way to take market share from the NYSE and Nasdaq, which dominate US equity trading. But some analysts question whether smaller players will be able to sustain tariff reductions long enough to make a lasting dent in the big two exchanges' market share.
David Cummings, Bats chief executive, said the aggressive pricing is a key part of its business model which aims to lure trade from its established competitors. "It takes a long time to change peoples' behaviour unless you give them a good economic reason," he said.
He said new rules, known as Regulation NMS, which will steer business to high-speed, low-cost exchanges, are likely to give a bigger competitive push to Bats because of the speed at which it can operate.
Last month, Bats unveiled a new, even lower tariff for trading shares in which it effectively gave money to customers in exchange for their business, that saw trading volumes more than double to more than 200m shares per day. Trading volumes remained at more than 300m for the first two days of February, even without the lower tariffs.
Bats believes it will be able to make even more inroads into trading of NYSE-listed shares because its trading platform is faster than the NYSE's hybrid platform – a cross between electronic trading and that of the old-fashioned floor.
Bats, which is based in Kansas City, Missouri, says its has more than 100 customers including most of the investment banks.
A spokesman for the NYSE said: "We have grown accustomed to an increasingly competitive environment."
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