Bats Auction Mechanism Launches on EDGX Options Exchange

The exchange operator has unveiled new price improvement functionality in response to demand.

Global exchange operator Bats Global Markets today announced the launch of the Bats Auction Mechanism (BAM) which provides price improvement opportunities for customer orders.

The company began rolling out the new functionality on the EDGX Options Exchange on 4th January and completed it, disruption-free, on 10th January.

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Kapil Rathi, Senior Vice President, Options Business Strategy, Bats, said: “We’re pleased to announce this functionality, in response to significant customer demand. While designing BAM, we worked with all of our customers and incorporated their feedback to bring the best auction process available in the options industry today, focusing on various issues and gaps that other exchanges haven’t addressed so far.”

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BAM is an options auction process which provides members with an opportunity to improve the price of their customer orders. The functionality alerts all members at the start of an auction in order to maximise the price improvement opportunity and allows agency orders to trade against the contra party specified by the initiating member or other members responding to the auction. BAM was approved by the SEC on 3rd January.

Priority Quote Allocation

A new feature called the Priority Quote Allocation was also launched in January, providing incentives for a broader range of participants to maintain two-sided quotes, which help keep tighter bid-ask spreads in continuous market trading.

BAM runs continuously throughout the trading day solely on EDGX, the pro-rata Bats’ options market launched in November 2015.

In September, Bats Global Markets entered an agreement to be acquired by CBOE Holdings, as reported by Finance Magnates. The transaction is expected to close in the first half of 2017, pending customary closing conditions and regulatory approval.

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