BATS Global Markets (BATS) has filed the “BATS Exclusive Listings Proposal” with the Securities and Exchange Commission, seeking to improve investors’ trading experience in thinly-traded securities.
Under the proposal, to be implemented at the company’s discretion, the BATS exchanges would no longer offer trading in thinly-traded stocks that maintain a primary listing on other US stock exchanges. The program would apply to issues with average daily trading volume (ADV) of less than 2,500 shares, encompassing about 700 US-listed securities, and would remain in effect for a given security until ADV exceeds 5,000 shares over a rolling 90-day period.
BATS CEO Chris Concannon, says: “As the second-largest stock exchange operator in the US and the top venue for exchange-traded fund and retail trading, we take our responsibilities seriously as a market leader and problem solver. We hope that other exchanges will be encouraged by this approach and follow our lead for the benefit of issuers and investors.
“More importantly, we view this proposal as a non-disruptive modification to US 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 a letter to the industry in April, Concannon outlined BATS’ rationale behind the proposal. The company believes that 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 (ie, tick size, auctions, etc).
Earlier this year, in a separate market structure letter to the trading community – and subsequent SEC rule petition – BATS suggested other ways market participants could potentially work to solve the long-running issue of improving liquidity in less-active stocks. In an effort to begin a broad industry conversation, the company suggested a tiered approach to access fees, and rebates, moving away from the market’s current one-size-fits-all approach.