Bats Global Markets this month 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).

The Bats Exclusive Listing Proposal is designed to facilitate the concentration of liquidity for these securities at the primary listing market with the goal of improving their trading experience.

“The 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,” Bats CEO Chris Concannon said in a customer letter.

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

“Obviously, once a stock achieves certain liquidity and trading characteristics, it will graduate into the competitive world of multiple exchange trading,” he said. “And most importantly, we are not advocating for a trade-at rule as part of this proposal as we believe it would be disruptive to the market.”

The proposal as a potentially critical step toward de-fragmenting trading volumes of illiquid securities, for the benefit of all investors, and, particularly, for issuers of these low-volume stocks, Concannon said. “More importantly, we view this proposal as a non-disruptive modification to U.S. equity market structure that Bats, other exchanges and the industry at large can implement with very little technical impact to the industry and its many participants.”

In an earlier market structure letter and subsequent SEC rule petition, Bats proposed a tiered approach to access fees, and rebates, moving away from the market’s current one-size-fits-all approach.

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