BATS gets regulatory nod for second U.S. options exchange

Mon Aug 10, 2015 11:36am EDT
 
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By John McCrank

NEW YORK Aug 10 (Reuters) - BATS Global Markets said on Monday it has received regulatory approval to open its second U.S. options exchange, set to be launched on Nov. 2, as the exchange operator tries to win a bigger share of the U.S. market.

EDGX Options will be the 13th U.S. options exchange. Incoming options orders will be prioritized on a pro rata basis, which means they will be sorted by price, and if there are two or more orders at the best price, trades will be allocated proportionally according to size. On BATS's existing options exchange, BZX Options, orders are prioritized based on price and the time they entered the market.

"Two-thirds of U.S. options market volume is executed on exchanges with a pro rata model, and we believe we can help make markets better for participants in this segment of the market," Bryan Harkins, head of U.S. markets at BATS, said in a statement.

BATS had a 10.8 percent market share of U.S. options in July, according to the Options Clearing Corp.

International Securities Exchange Holdings (ISE) filed an application with regulators in September for its third options exchange, ISE Mercury, which has yet to open.

Some traders have complained there is little difference among the various options exchanges, adding that the glut just adds to the complexity of the market.

BATS competes with options-exchange operators NYSE, owned by Intercontinental Exchange Inc ; CBOE Holdings ; Nasdaq OMX Group ; ISE, owned by Deutsche Boerse ; BOX Options Exchange, owned by TMX Group ; and Miami International Holdings Inc.

BATS said it expects all of the industry's multiply listed options to be available for trading on EDGX Options, and that its members will be to start connecting to the new trading platform on Aug. 17.

The Kansas City-based company, which is the No. 2 U.S. stock exchange operator, also runs the largest pan-European stock market, BATS Chi-X Europe, and a foreign exchange trading platform called Hotspot. (Reporting by John McCrank; Editing by Peter Galloway)