BِATS Reports Higher Profit in Q3 2016, Hotspot Boosts FX Market Share

BATS' Hotspot venue remained strong in the global FX market with its share reaching 12.4% versus 11.6% in Q2.

Bats Global Markets, Inc. (Bats: BATS), the Lenexa-based operator of the U.S second-largest stock exchange, reported an increase in its revenue and earnings in the three months ending September 30, 2016 compared to a year ago.

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Bats said on Thursday that it earned in the third quarter $28.5 million, or 29 cents a share. This represents an YoY gain of 13.0 percent and 7.0 percent respectively. It earned $25.3 million, or 27 cents a share, in the same months of 2015.

Another area of strength for the quarter was Bats’ adjusted earnings which orchestrated a rise of $35.3 million, or 36 cents a share, a jump of 17.0 percent and 13.0 percent YoY compared with $ 30.3 million and 32 cents a share in Q3 2015.

Additionally, net revenues, which represents revenue less cost of revenue, were also on the uptick in Q3 2016, with BATS orchestrating a figure of $108.8 million, compared to just $104.0 million in Q3 2015, good for a jump of 5.0% YoY. The growth was driven primarily by improved connectivity fee pricing in the U.S. Equities, U.S. Options, and Global FX markets.

Revenue from transaction fees dropped -15.1% to $307.1 million, from $361.8 million in the three months through September 2015, while revenue from market data fees were also down -1.9% to $71.8 million compared to $73.2 million a year earlier.

Mixed results in Market shares

In terms of its exchanges’ market share, BATS Global Markets highlighted that its market share in the U.S. Options market share dropped to 11 percent instead of 11.6% one quarter ago. However, BATS remained strong in the Global FX market with its share reaching 12.4% versus11.6% in Q2 2016 and 11.1% last year. The figure is the best on record since its acquisition of Hotspot, which now operates as BATS’ institutional spot foreign exchange (FX) venue.

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Earlier in September, Hotspot marked an impressive rebound in absolute terms, with the trading volume increasing to $621.8 billion – a growth of over $100 billion in nominal terms. However, the FX market registered a decline in trading volumes in October as the figures stood at $531 billion last month, which is a decline of 14.5% when compared to last month.

Meanwhile, a slight QoQ advance was seen across the firm’s U.S. Equities market share which registered 20.8% from 20.4% in the second quarter, though its average daily volume dropped to 6.6 billion shares from 7.3 billion a quarter earlier. Across a yearly timeframe though, the figure dropped from 21.7 market share in Q3 2015. Further, European Equities market share were also down to 23.0% from 24.4% in 2015.

With new seven ETF listings in the third quarter, Bats remained the #1 market for the trading of ETFs with a combined market share of 24.2%. In the nine months ended September 30, 2016, Bats added 47 ETF listings.

Commenting on the results, the CEO of Bats Global Markets, Chris Concannon, said: “The third quarter was strong for Bats and our shareholders, highlighted by the announcement with CBOE Holdings. We expect this transaction, once complete, to move the combined company into new asset classes, products and geographies, all powered by Bats market-leading proprietary technology.”

“Operationally, it was business as usual during the quarter as we continued to grow organic net revenue† and adjusted earnings†, driven by continued growth in non-transaction revenues and increased U.S. Options market share,” he added.

BATS Background

Bats was founded in June 2005 and then became operator of a licensed US stock exchange in 2008, and opened its pan-European stock market in October 2008. BATS also got into the foreign exchange (FX) market last year after acquiring Hotspot, a currency-trading venue, making its first foray into the $5.3 trillion market and diversifying its sources of income.

Earlier in September, Bats and the Chicago Board Options Exchange made the headlines after announcing that the CBOE would acquire Bats for about $3.2 billion. Bats Chief Executive Chris Concannon will be president and chief operating officer of the combined company.

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