BATS Exchange
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| BATS Exchange | |
|---|---|
| Name | BATS Exchange |
| Type | Stock exchange |
| Founded | 2005 |
| Headquarters | Lenexa, Kansas; New York City |
| Owner | Cboe Global Markets (post-2017) |
| Key people | Joe Ratterman; Paul Zubulake; Colin Bender |
| Currency | United States dollar |
BATS Exchange BATS Exchange began as an alternative trading system that rapidly grew into one of the largest equity and options venues in the United States, challenging incumbents such as New York Stock Exchange, NASDAQ, American Stock Exchange, Chicago Stock Exchange, and Philadelphia Stock Exchange. Founded by executives with prior experience at CBOE and Archipelago Holdings, the organization prioritized low-latency execution, market data competition, and fee innovation, attracting order flow from broker-dealers including Goldman Sachs, Morgan Stanley, Citigroup, J.P. Morgan Chase, and Barclays. Through its development, the exchange engaged with regulators and industry groups like the Securities and Exchange Commission, FINRA, National Association of Securities Dealers (historical), and Financial Industry Regulatory Authority on rules shaping U.S. equities and options trading.
History
The enterprise traces origins to the mid-2000s brokerage and technology ecosystem around Charles Schwab Corporation, TD Ameritrade, and E*TRADE when fragmentation of U.S. markets spurred non-exchange venues such as Instinet and Bloomberg LP to innovate. Early leadership included executives formerly at CBOE and Direct Edge, and the platform formally launched matching engines that competed with systems used by NYSE Arca and NASDAQ OMX Group. High-profile milestones included rapid market share growth, strategic partnerships with firms like BATS Global Markets, and legal and regulatory scrutiny involving SEC rule filings and industry litigation where counterparties included NYSE Group and Direct Edge Holdings. In 2017 the company was acquired by Cboe Global Markets, uniting two major U.S. options market operators and closing a chapter involving consolidation similar to past transactions between Intercontinental Exchange and NYSE Euronext.
Operations and Market Structure
The venue operated multiple national market systems with order types and price-time priority models resembling those at New York Stock Exchange Arca and NASDAQ OMX BX. Its market model incorporated maker-taker pricing structures that engaged liquidity providers such as Citadel LLC, Virtu Financial, Jump Trading, Two Sigma Investments, and Renaissance Technologies. Market centers were connected via telecommunications and colocation facilities at hubs shared with Equinix, CyrusOne, and Digital Realty. Routing procedures and order protection obligations required coordination with national systems like Consolidated Tape Association and trade reporting via ACT-style systems used by broker-dealers including Interactive Brokers, Charles Schwab, and Fidelity Investments. The entity also participated in intermarket linkages under the regulatory framework that involved Regulation NMS and prior rulemakings of the SEC.
Regulation and Compliance
Regulatory oversight intersected with Securities Exchange Act of 1934 provisions and reporting obligations to the Securities and Exchange Commission and FINRA. Compliance programs addressed new market data policies and anti-manipulation surveillance akin to those enforced by Commodity Futures Trading Commission in other markets. The exchange filed rule changes, defended against administrative proceedings, and negotiated with enforcement divisions representing positions similar to matters involving SEC v. Citigroup-type enforcement precedent (illustrative). Engagements with self-regulatory organizations included cooperation on audit trails, surveillance information sharing with SRO peers, and coordination on financial responsibility rules used by clearinghouses such as The Depository Trust & Clearing Corporation (DTCC) and Options Clearing Corporation (OCC).
Technology and Trading Systems
A core competitive advantage was low-latency matching engines developed using techniques familiar to engineering teams from Google, Microsoft, and Amazon Web Services backgrounds, and leveraging network designs common to NYSE Technologies and Thomson Reuters. Colocation services were provided in data centers adjacent to those used by firms like Citadel Securities and Virtu Financial. The systems supported FIX protocol sessions used by sell-side firms such as Bank of America Merrill Lynch and proprietary trading firms including Hudson River Trading. Market data distribution employed multicast and proprietary feeds comparable to SIP alternatives and real-time products offered by Bloomberg L.P. and Refinitiv. Disaster recovery, business continuity, and order-handling algorithms were designed to meet standards similar to those adopted by Federal Reserve Board guidance and industry best practices.
Listings and Products
The organization offered listings and execution services across U.S. equities, exchange-traded funds managed by sponsors like BlackRock and Vanguard, and options products that competed with offerings from CBOE and NASDAQ OMX PHLX. Its market hosted securities issued by corporations such as Apple Inc., Microsoft Corporation, Amazon.com, Inc., Tesla, Inc., and Alphabet Inc. through consolidated trading, and supported institutional order types used by asset managers including State Street Corporation and Northern Trust Corporation. Over time the platform expanded into alternative tick sizes, midpoint matching, and dark-pool-like facilities paralleling offerings from Liquidnet and ITG.
Mergers, Acquisitions, and Corporate Developments
Corporate transactions included strategic mergers and an eventual acquisition by Cboe Global Markets in 2017, a deal comparable in scale and strategic rationale to Intercontinental Exchange acquisitions of regional exchanges. Prior to that, the company engaged in growth through acquisitions of matching technology, market data assets, and partnerships with capital providers including Wells Fargo and Deutsche Bank. Post-acquisition integration involved combining trading franchises with CBOE's options business, aligning governance with stakeholders such as institutional investors and index providers like S&P Dow Jones Indices and NASDAQ OMX.