BATS Jabs Back at NYSE and Nasdaq on Auction Proposal


If this were a professional boxing match, it looks like its going to be a real slugfest that could go 15 rounds.

BATS Global Markets, a unit of CBOE Holdings, has responded to the recent criticisms of its proposal to have closing auctions, from its biggest rivals NYSE and Nasdaq. BATS, according to a report from Reuters, filed a letter with regulators calling the protests disingenuous. \

Back in May, BATS announced it planned to offer broker dealers a new order type that would give them the same closing prices derived from the closing auctions on Nasdaq and the NYSE for stocks listed on those exchanges, but at a discount. The goal – grab market share from its rivals NYSE and Nasdaq.

According to traders, upwards of 30 to 40 percent of all daily equity market activity takes place during the close and during these auctions. The close is usually defined as the time period between 3:30pm EST and 4pm.

NYSE and Nasdaq have argued that BATS’ closing auctions would cut into their own business and provide the market and investors with inferior prices. It would also hurt NYSE and Nasdaq shareholders, they continued.

“We find their sincerity about this concern quite lacking given they run this risk every day,” Reuters reported BATS as writing in its letter to the U.S. Securities and Exchange Commission dated Aug. 2.

That is because Nasdaq and NYSE affiliate NYSE Arca already run closing auctions for securities listed on rival exchanges every trading day, said BATS, which only lists ETFs and the stock of its parent, CBOE.

If the SEC approves BATS’ proposal, it would allow the exchange operator to compete for a bigger share of the trillions of dollars in trades at the end of the session, when fund managers execute most of their orders so they can price their assets off final prices on the listing exchanges.

BATS said its proposal would not impact prices because it would accept only “market on close” orders, which are matched at the closing price.


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