BATS exchange withdraws IPO after stumbles

Sat Mar 24, 2012 1:37pm EDT
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By Olivia Oran, Jonathan Spicer, Chuck Mikolajczak and Carrick Mollenkamp

NEW YORK (Reuters) - In a breakdown that resembled a mini version of the 2010 "flash crash," a series of glitches hit the market debut of BATS Global Markets Inc on Friday, causing the company to take the extremely rare step of withdrawing its initial public offering of shares.

The problems caused the shares of exchange operator BATS to plunge from their $16 offering price and briefly trade for less than a penny on Friday morning, creating havoc in the marketplace and again calling into question the stability of high-speed trading.

The glitches, which also prompted a halt in trading of Apple Inc shares, were so severe and so visible, involving BATS' own listing, that some observers said they threatened confidence in the nation's third-largest exchange.

This was the first IPO on the BATS exchange.

"I think some companies might say ‘If they can't handle the IPO of their own stock, how can they handle the IPO of our stock?'," said Dennis Dick, a Detroit-based market structure consultant and trading member at Bright Trading LLC. "There is going to be a confidence issue of listing on BATS."

BATS, an acronym for "Better Alternative Trading System," suspended trading in BATS shares and alerted investors to "system issues" around mid-morning in New York. The exchange, a rival to the New York Stock Exchange and Nasdaq that is based in Kansas City, Mo., later said the problems had been resolved and BATS shares would resume trading at noon.

Late in the day, BATS said trading would not resume, and later said it had decided to unwind its share offering.

Eight hours after the problem started the company blamed a "software bug" for setting off the series of glitches.   Continued...

Joe Ratterman, CEO of BATS Global Markets, speaks at the Reuters Exchanges and Trading Summit in New York March 29, 2010. REUTERS/Natalie Behring