Best Exchange Technology


In business, a newcomer needs to give a customer a reason to switch from the incumbent provider, as inertia is a powerful force.

Bats Global Markets has evolved from not existing eight years ago to handling about one-eighth of U.S. equity trading, so it’s fair to say the exchange company has made a splash. One of the key selling points Bats has used to peel traders away from other exchanges is state-of-the-art technology.

Chris Isaacson, chief operating officer of Bats

Chris Isaacson, chief operating officer of Bats

“Customers appreciate our combination of reliable and consistently low-latency technology,” said Chris Isaacson, chief operating officer of Bats. “We also have a very responsive and capable team that sets us apart from the competition.”

“Today’s markets are electronic and complex; it’s really the people behind the technology that matters,” Isaacson told Markets Media. “We have very low turnover and many of the people who were involved in building the original Bats platform are still with the firm today.”

Based in Lenexa, Kansas, Bats operates the BZX and BYX stock exchanges and Bats Options in the U.S., and Bats Chi-X Europe out of London. Bats’ equity market share of about 12% ranks third among U.S. exchange operators, behind NYSE Euronext and Nasdaq and slightly ahead of Direct Edge. Bats Options, launched in February 2010, has market share of about 4% and ranks fifth among U.S. options-exchange companies.

“Our members appreciate our focus on building quality markets that benefit all investors,” Isaacson said. “We are leaders in execution quality and the way in which we’ve integrated hidden liquidity within displayed markets,” which resulted in about $37 million in price improvement for customers from midpoint orders in the second half of 2012, he said.

Bats aims to provide a “healthy ecosystem” for members that emphasizes reliability and a variety of order flow. The company offers free risk-management tools to all customers, “and we recently launched a retail price-improvement program on the BYX exchange. There are more than a dozen members already certified on the market-making or retail side.”

“Customers appreciate our combination of reliable and consistently low-latency technology. We also have a very responsive and capable team that sets us apart from the competition.” Chris Isaacson, chief operating officer of Bats

“From a technology perspective, we integrated Chi-X Europe onto Bats Technology in 2012. This was a major technology migration that went off seamlessly and enabled us to grow market share,” Isaacson said. “Our technology has been very reliable throughout our history and there has been no downtime since April 4, 2012. We had record market share in October of 13%, and January was our second-best month in U.S. options, with 3.9%.”

For 2013, Bats’ goal is to “provide the best possible experience for members,” Isaacson said. One specific area of focus is inter-book routing in Europe between the BATS Chi-X book and he BATS Europe book, which is meant to get better prices for investors. Bats is also working on a trade-reporting facility in Europe.

“There’s a big regulatory push to bring off-exchange trading onto exchanges, and we want to facilitate that movement with our customers,” Isaacson said. “There are a lot of regulatory-driven technology projects that are very important for the industry. Kill switches we have implemented already. With the consolidated audit trail the timeline is brisk—we are very involved with the drafting of an RFP.”

“Most imminent is limit up/limit down and market-wide circuit breakers, and we are very involved,” Isaacson continued. “We need to have test symbols so people can test limit up-limit down, we’re doing that as an industry…We have a full plate of development initiatives.”

Bats also plans an overhaul of its website and more educational outreach about the company and its value proposition for traders and investors. “We plan to spend more time working with investors and the financial community about Bats and key market-structure topics, including who our membership is made up of and who it is not,” Isaacson said. “The buy side is a particular area of focus in 2013.”

According to Isaacson, Bats’ technology is consistent and reliable, and the company delivers on its promises. “When we tell you you’ll get efficient and reliable performance and your orders will act a certain way, that’s what you’ll get,” he said. “We’re happy we have great, supportive customers, but we have to re-earn their business every day.”

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