Better Alternative Trading System (BATS)

What Is Bats Global Markets?

Bats Global Markets was a U.S.-based exchange that listed several different types of investments, including equities, options, and foreign exchange. It was founded in 2005 and was acquired by Cboe Options Exchange (Cboe) in 2017. Prior to being acquired, Bats Global Market was one of the largest U.S. exchanges and well known for its services to broker-dealers as well as retail and institutional investors.

Understanding BATS

Bats Global Markets was previously known as Better Alternative Trading System (BATS) and was initially branded as an alternative trading platform, marketing itself to investors as a company that was more innovative than established exchanges. When it entered the European market in 2008, the company was rebranded as Bats Global Markets.

Key Takeaways

  • Better Alternative Trading Systems was rebranded to Bats Global Markets in 2008 when the exchange made a foray into European markets.
  • CBOE acquired Bats in 2017 and migrated three of its exchanges to the Bats Global Markets platform.
  • Prior to the acquisition, Bats had become one of the largest exchanges in the world with listings in stocks, options, ETFs, and foreign exchange.

As an exchange, Bats grew into the main competitor to the New York Stock Exchange (NYSE) and Nasdaq, both of which handled a greater amount of equities when ranked by market capitalization. In 2016, Bats had become the second-largest U.S. equity exchange by market share and was the largest exchange-traded fund (ETF) exchange.

In the United States, its BZX Exchange became a registered exchange in 2008, and its BYX Exchange was launched in 2010. Between 2011 and 2015, Bats merged with and acquired several exchanges. In 2011, it acquired Chi-X Europe, making it the largest stock exchange in Europe. In 2014, a merger with Direct Edge added the EDGA and EDGX exchanges. In 2015, Bats acquired Hotspot, an electronic communication network (ECN), allowing institutional investors spot trading, swap execution, and forward trading services.

BATS vs. Cboe

BATS experienced several notable technical hurdles over the years. The company sought to go public in an initial public offering in 2012, with shares being offered on its own exchange. This effort was scrapped when a serious technical issue resulted in its IPO price tumbling from $16 per share to $0.04 a share.

In 2013, the company indicated that a technical error led to hundreds of thousands of trades executing at prices lower than the best bid and offer, which also affected investors who were selling shares short. The error affected trades going back four years.

Cboe, the owner of the Cboe Options Exchange and Cboe Futures Exchange (CFE), made an offer to acquire Bats Global Markets in 2017. The acquisition allowed Cboe to expand into Europe and increase its offerings to include foreign exchange and ETFs. Cboe now operates four U.S. options markets, CFE, a European equities market, four U.S. equities markets, and a foreign exchange market. Three of the exchanges that Cboe operated prior to acquiring Bats migrated to the Bats trading platform.

Article Sources

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  1. U.S. Securities and Exchange Commission. "Form S-1 Registration Statement: Bats Global Markets, Inc.," Page 1.

  2. Cboe. "CBOE Holdings Announces Close of Acquisition of Bats Global Markets."

  3. Cboe. "Overview," Page 2.

  4. U.S. Securities and Exchange Commission. "Form S-1 Registration: Bats Global Markets, Inc.," Page 52.

  5. Cboe. "Bats Reports Strong Market Share Across All Markets in July; Remains #1 in U.S. ETF Trading, #1 Pan-European Stock Market," Page 1.

  6. U.S. Securities and Exchange Commission. "Form S-1 Registration Statement: Bats Global Markets, Inc.," Page 2.

  7. Cboe. "Bats Global Markets Completes Acquisition of Chi-X Europe."

  8. U.S. Securities and Exchange Commission. "Self-Regulatory Organizations; BATS Exchange, Inc.; BATS-Y Exchange, Inc.; Order Granting Approval of Proposed Rule Change in Connection With the Proposed Business Combination Involving BATS Global Markets, Inc. and Direct Edge Holdings LLC."

  9. Cboe. "BATS Agrees To Acquire Hotspot FX Market."

  10. PR Newswire. "BATS Global Markets Withdraws Initial Public Offering."

  11. Cboe. "Markets."

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