BATS Global Markets shakes up ETF exchange dynamics with new initiatives

Oct 14th, 2015 | By | Category: ETF and Index News

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BATS Global Markets, owner of the BATS Exchange, a primary-listing venue for exchange-traded products, has unveiled the BATS ETF Marketplace, an exchange specifically designed for the listing and trading of ETPs.

BATS Global Markets shakes up exchange dynamics with new initiatives

Chris Concannon, CEO of BATS Global Markets.

Launched concurrently with the new exchange are two initiatives aimed at offering incentives to issuers and market makers respectively. Collectively they seek to broaden the scope and boost the liquidity of BATS-listed ETF products.

“As the largest market for exchange-traded funds, BATS is uniquely positioned to change the game for issuers, investors and market makers,” said BATS Global Markets CEO Chris Concannon.

The BATS Issuer Incentive program offers an annual rebate to issuers based on the consolidated average daily volume (CADV) of trading occurring on their ETPs. Traditionally, issuers would be required to pay listing fees with an exchange, potentially as high as $55,000, on an annual basis. BATS has shaken up the industry by allowing these providers to offset these costs based on the level of trading on their products.

The amount of the rebate depends on a schedule of CADV trading brackets and their corresponding incentive levels. For an ETP to qualify for a higher bracket, it needs to maintain that CADV trading level for three consecutive months. The smallest CADV trading bracket runs from 1-3 million shares, offering a $3,000 incentive; the largest CADV trading bracket includes ETPs trading a daily average of over 35 million shares, offering a compelling $400,000 rebate.

Laura Morrison, Senior Vice President, Global Head of Exchange Traded Products at BATS commented: “At BATS, we believe it is important for an exchange to align its interests with the interests of its issuers and their investors. Our Issuer Incentive Program accomplishes that by allowing issuers to share in the revenues from the trading of their products.”

“Our Issuer Incentive program creates an opportunity for ETP issuers to offset expenses with revenue from activity in their products while trading on one of the most liquid markets for ETPs.”

The BATS Lead Market Maker program is a rewards-based program that aims to boost liquidity on the BATS exchange by providing rebates to market makers for increasing liquidity on their assigned ETPs. Firms need to apply for the designation but, upon successful application, they would become the exclusive market maker for that ETP. The price initiative seeks to broaden the coverage of BATS-listed ETPs by encouraging firms to become market makers in a greater number of products.

“Our new Lead Market Maker incentives are designed to further enhance the market quality of all ETPs listed on BATS, regardless of size or liquidity. Traditional market maker programs target individual symbols while our innovative market maker incentives are designed to encourage liquidity and support across an entire portfolio of ETP products,” noted Morrison.

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