Focusing liquidity

BATS to Propose Single Exchange Trading of Thinly Traded Stocks

BATS will submit a new rule to the SEC proposing to focus the market in thinly traded stocks on a

Aside from discussing the future plans of BATS Global Markets about Hotspot, the company’s new CEO Chris Concannon has also provided some details about other businesses. In a letter to clients and industry peers, the new leader of one of the biggest exchanges in the world shared details about the firm’s equity market offering.

Focusing on the challenges associated with thinly traded shares on the U.S. equity markets, BATS has turned to regulators with proposals on how to address the long-running problem of thin liquidity.

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Mr. Concannon stated in the letter, “With a goal of beginning an industry-wide conversation, we suggested a tiered approach to access fees, and rebates, moving away from the market’s current one-size-fits-all approach.”

BATS will propose changes by filing a rule with the SEC later this month

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“This month, BATS will file a rule with the SEC proposing to no longer offer trading on the BATS markets in thinly traded stocks that maintain a primary listing on other U.S. stock exchanges (Nasdaq and NYSE),” he explained. 

The proposal aims to facilitate the concentration of liquidity for the shares at the primary listing market in order to deliver a better trading experience.

“Our filing with the SEC will define the characteristics of the thinly traded stocks that we believe deserve Exclusive Listings, and we hope that other markets will be encouraged by this approach and follow our lead for the benefit of issuers and investors,” Mr. Concannon explained.  

In the opinion of BATS, concentrating displayed liquidity in thinly traded stocks at a single venue will enable market participants to more efficiently form prices, and that one venue will also be better to innovate their markets specifically for thinly traded stocks (i.e., tick size, auctions, etc.).

The BATS Exclusive Listing Proposal as a potentially critical step toward defragmenting trading volumes of illiquid securities

According to the proposal, once a stock achieves certain liquidity and trading characteristics, it will be upgraded into the competitive world of multiple exchange trading. The CEO of BATS highlighted that the company was not advocating for a trade-at rule as part of this proposal as it believed it would be disruptive to the market.

Mr. Concannon cited in the letter, “We view the BATS Exclusive Listing Proposal as a potentially critical step toward defragmenting trading volumes of illiquid securities, for the benefit of all investors, and, particularly, for issuers of these low-volume stocks.”

 “As the #1 U.S. stock exchange (excluding the end-of-day auction) and top venue for both ETF and retail trading, we take our responsibilities as a market leader seriously and believe we owe it to the industry to put forth positive, but simple solutions like this proposal. We look forward to your input and feedback,” Mr. Concannon concluded.

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