Definition of Best Alternative Trading System (BATS)


What is Bats Global Markets?

Bats Global Markets was a US-based exchange that listed several different types of investments, including stocks, options, and currencies. It was founded in 2005 and acquired by CBOE Holdings (CBOE) in 2017. Before being acquired, Bats Global Market was one of the largest stock exchanges in the US and was known for its services to stockbrokers as well as to retail and institutional investors.

Understanding the 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 renamed Bats Global Markets.

Key takeaways

  • Better Alternative Trading Systems was renamed 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 grown into one of the world’s largest exchanges with listings on stocks, options, ETFs and currencies.

As an exchange, Bats became the main competitor to the New York Stock Exchange (NYSE) and Nasdaq, both of which handled a greater number of shares when classified by market capitalization. By 2016, Bats had become the second-largest stock exchange in the US by market share and was the largest exchange of exchange-traded funds (ETFs).

In the United States, its BZX Exchange became a registered exchange in 2008, and its BYX Exchange launched in 2010. Between 2011 and 2015, Bats merged 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), which allows institutional investors spot trading, swap execution and forward trading services.

Bats in front of CBOE

BATS experienced several notable technical hurdles over the years. The company sought to go public in an initial public offering in 2012, and the shares were offered on its own exchange. This effort was scrapped when a serious technical problem caused its IPO price to drop from $ 16 a share to $ 0.04 a share.

In 2013, the company indicated that a technical error led to hundreds of thousands of trades being executed at prices lower than the best bid and buy, which also affected investors who were selling stocks short. The error affected operations dating back four years.

CBOE Holdings, owner of the Chicago Board 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 currencies and ETFs. CBOE now operates four US options markets, CFE, two European equity markets, four US equity markets, and two forex markets. Three of the exchanges that CBOE operated prior to acquiring Bats migrated to the Bats trading platform.

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Mark Holland

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