Listings Competition Heats Up

Terry Flanagan

In the competitive listings space, new exchanges need to be aggressive to gain a substantial foothold.

Bats Global Markets, which recently launched its own primary listings service to take on NYSE Euronext and Nasdaq OMX, has introduced a new aggressive pricing model in a move to attract new business.

Under the new pricing system, companies whose stock or exchange-traded product trades more than two million shares per day will list annually for free. The initial listing fee at Bats ranges from $10,000 to $100,000, while annual fees range from $20,000 to $35,000. Products which don’t trade above the two million per day mark will be subject to those annual fees. Companies that are already listed at other venues and wish to be listed on Bats will have their initial listing fee waived.

The new pricing model is meant to appeal to small- and mid-cap companies looking to grow, according to Bats chief executive Joe Ratterman. Larger companies won’t be subject to fees at all if they are traded enough.

Despite the innovation, it will still be a difficult battle to gain market share against NYSE and Nasdaq.

“The listings business is all about branding,” said Diego Perfumo, an exchange analyst with Equity Research Desk. “It will be very hard to convince a company to list with you, because your fees are a little lower, when you have no name and no reputation. It’s about exposure.”

The new pricing comes on the heels of a new market maker program introduced by Bats. The new program uses a rewards-based system to incentivize market makers to make tighter quoted spreads with increased liquidity for each listing on Bats. The so-called Competitive Liquidity Provider program will particularly benefit small- and mid-cap companies who may have a lack of liquidity of their stock, which can make attracting larger investors difficult.

Bats currently trades about 11% of all U.S. equities volume. Founded in 2005 as an electronic communications network for trading, Bats has since grown to be the third largest exchange operator in the U.S., behind NYSE and Nasdaq. Bats operates two trading platforms in the U.S., Bats BZX and Bats BYX, as well as and Bats Options, an options exchange. It recently acquired Chi-X Europe to form Bats Chi-X Europe, a pan-European multilateral trading facility and the largest electronic trading platform in Europe with 25% market share.

Bats announced in May 2011 its plans to go public in a $100 million initial public offering. Initially slated for late 2011, the IPO is now expected to occur in the first half of 2012.

Related articles