How does the BATS exchange work?

Instead of buying shares on the NYSE or NASDAQ, retail-level investors may soon be placing orders on BATS as well, provided their brokers offer access to the exchange.

A tiny tech and trading start-up, BATS Global Markets, piqued the curiosity of investors after announcing that it will soon file as a primary U.S. market. The move, which BATS hopes will allow it to start listing stocks in the fourth quarter, would pit the Kansas City-based stock exchange against the two largest stocks exchanges in the world in the NYSE and NASDAQ.

What does the move mean for investors? Instead of buying shares on the NYSE or NASDAQ, retail-level investors may soon be placing orders on BATS as well – provided their brokers offer access to the exchange.

“The key for this to be successful will be to be able to attract a key company to list,” Josef Schuster, founder of Chicago-based IPO investment firm IPOX Schuster LLC, tells Reuters. Schuster speculates that doing an IPO and listing BATS shares on the BATS exchange itself could be a way of doing that.

Alternatively, attracting a sought-after tech company like a Zynga or a Groupon to list with BATS might do the trick. As it stands, BATS is already the third-largest exchange in the world by volume. That’s largely thanks to the exchanges’ emphasis on speed.

When BATS went live in January of 2006, most trading platforms executed trades in one to 30 milliseconds. BATS executed trades in one to three milliseconds. Today, BATS executes 80 percent of all its trades in 250 microseconds (.25 millliseconds). Contrast that with the NYSE, which executes trades in 650-950 microseconds.

BATS’ emphasis on speed has attracted business from “hedge funds and other trading operations” that engage in high-frequency trading, Newsweek reports. Should the company land a few big fish to list, it could very well grow from there and challenge the supremacy of the NYSE and NASDAQ.

Related

THE METAL THAT WOULDN’T STOP CLIMBING


15 gold price predictions for 2011


GIVE ME FACEBOOK SHARES


How to buy stock in private companies


MORE THAN FRIENDS


3 reasons to invest in FriendFinder IPO (FFR)


TECHNOLOGY IPO CALENDAR


The unofficial tech IPO calendar for 2011


THE ULTIMATE CHINESE ANTI-VIRUS


Is China’s Qihoo IPO a buy? (Ticker:QIHU)

THE OTHER FACEBOOK


Five reasons to invest in the RenRen.com IPO

Leave a Reply

Your email address will not be published. Required fields are marked *