By Rob Daly

Bats Doubles Down on Options and FX

Bats Global Markets expects to spend the remainder of 2016 focused on its U.S. options and global foreign-exchange operations, according to CEO Chris Concannon.

“We remain on track to deliver auctions capabilities to our EDGX options exchange by the end of this year,” he said during Bats’ second-quarter earnings call today. “Similarly, we remain on schedule to launch FX forwards on our Hotspot platform by year end and delivering on a promise we made when we purchased the platform on 2013.”

Concannon estimated that 30% of the U.S. options market’s volume takes place within auctions.

Chris Concannon,Bats Global Trading

Chris Concannon,
Bats Global Markets

“It’s quite a healthy portion of the options market where investors do receive price improvement for their orders as they come into the exchange,” he noted.

To tap this market. Bats began rolling out its Bats Auction Mechanism on July 11 and expects to complete the process once it receives final approval from the U.S. Securities and Exchange Commission.

The mechanism will alert exchange members when an auction is about to start as well as letting agency orders trade against ‘contra’ parties specified by the initiating member or other members responding to the auction.

At the same time, Bats also will roll out its Priority Quote Allocation function that provides participants with incentives to maintain two-sided quotes.

“That means that the market participants who are in the order book will be given a higher priority when the respond to auctions,” explained Bryan Harkins, executive vice president and head of U.S. markets at Bats.

Concannon could not escape the earnings call without addressing Brexit.

In the short term, he expects episodic volatility and volume spikes over the two or three years it will take the UK to decouple itself from the EU, he noted. “In the longer term. we may choose to establish a smaller office or registration within an EU country while we maintain the majority of our operations in London.”

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