New Competition in Listings Space

Terry Flanagan

Asset manager BlackRock will be the first to use Bats Global Markets’ new primary listings service.

The first securities to be listed on Bats’ exchange platform will be a suite of BlackRock’s iShares exchange traded funds. The funds are linked to indexes of international stocks. BlackRock will list eight funds on Bats; the first will come Jan. 24, with the remaining seven to come shortly after.

“iShares is one of the leading global providers of exchange-traded products and we are proud to kick off the new year by welcoming their new products to our market,” said said Joe Ratterman, Bats chief executive in a statement. “The innovation and leadership that iShares brings to capital markets makes them the perfect partner for our first primary listings.”

Because of a “quiet period” related to its pending initial public offering, a spokesperson from Bats has declined comment.

“We appreciate the partnership and the innovative approach they are bringing to the market,” said Noel Archard, global head of product development iShares at BlackRock.

Exchange traded funds, or ETFs, are funds that hold stocks, commodities or bonds, and can be traded like any other stock on an exchange. They have grown in popularity in recent years to the point where they are now the most popular type of exchange traded product. One of the most actively-traded ETFs, State Street Global Advisors’ SPY, is a fund that tracks the performance of the S&P500 index.

U.S. regulators last year gave approval for Bats to start listing shares, allowing the Kansas City-based trading platform to compete directly with the incumbent exchanges offering listings, NYSE Euronext and Nasdaq OMX. It will look to attract listings away from its rivals by offering lower fees.

While Bats will look to offer a low-priced alternative venue for companies to list, some observers believe that it will be a difficult battle.

“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.”

All securities are expected to be listed on its Bats BZX exchange. It began testing its infrastructure with members and service providers in mid-summer 2011. Bats is set to go public in a $100 million initial public offering in the upcoming months, with its own shares listed BZX.

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. On any given day it trades between 10 and 12 percent of U.S. equities.

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 multilateral trading facility and the largest electronic trading platform in Europe with about 25% market share.

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