Bats Trading

[Pork Chop]

I am creating this thread to discuss Bats Trading. I know there are few threads out there, but I thought now, since this company is growing leaps and bounds it's deserves an official one.

Financial News: BATS And Chi-X Europe: An Anatomy Of A Deal

BATS Global Markets has confirmed that it has entered into a definitive agreement to purchase Chi-X Europe in a deal that marks a major coup for the one-time upstart Kansas City-based trading firm.

The deal give BATS Global Markets a major European presence creating Europe's largest equities trading exchange with nearly 35% of the pan-European market - a feat that most market-watchers agree BATS could not have achieved through organic growth alone.

BATS' well-known technology prowess also puts the exchange operator in a much stronger position to enter into the European derivatives market, identified by all market participants as the next major source of trading revenues. The company already runs a US options market and as a result will be able to gain economies of scale by leveraging its US-based research and development to trade derivatives in the European market.

Will Rhode, a research analyst at Tabb Group, said: "It will be a challenge for BATS to catch up with the big European derivatives players but their track record suggests there is no reason why they can't become a contender in this space."

I love the following sentence from the article:

Populated by God-fearing mid-Westerners, BATS Global Markets, which remains headquartered in Kansas City, initially perplexed the bullish Wall Street crowd, which initially struggled to take the straight-laced trading firm seriously. However, they were soon forced to sit up and take notice when BATS rapidly grew to become the third-largest exchange in the U.S., and is now thought to be valued at around $1.2bn and growing.

What strange statement to make from the WSJ. But, I am not surprised.

http://online.wsj.com/article/BT-CO-201 ... 10485.html

Anyways, Bats is a killer company and one to watch in KC and around the globe.

Disclaimer: I do not work for Bats, but it would be great if I did.

[brewcrew1000]

Their HQ is actually in Lenexa, they use to be HQ in briarcliff.  I know someone that works their and they reinvest a lot of money into beefing up their technology.  I would bet they end up getting bought out by NYSE or NASDAQ.

It would be pretty cool if bats was downtown and they built this large skyscraper instead of being in a boring office park in lenexa.

Their wiki page seems to be a mistake, is KCK a satellite city
http://en.wikipedia.org/wiki/Bats_Exchange,_Inc

[Pork Chop]

I agree it's a shame that they are in Lenexa, but I am sure it's due to cost, since they are in a very cost conscience industry i.e. equity trading.

I don't know if they would want to be acquired by NYSE or NASDAQ, since they built their business to compete against the duopoly. However, money does talk and it would be a shame if they were. I would rather have a the third largest U.S exchange based her in KC. Downtown would best though in order to create a larger financial district.

Their HQ is actually in Lenexa, they use to be HQ in briarcliff.  I know someone that works their and they reinvest a lot of money into beefing up their technology.  I would bet they end up getting bought out by NYSE or NASDAQ.

It would be pretty cool if bats was downtown and they built this large skyscraper instead of being in a boring office park in lenexa.

Their wiki page seems to be a mistake, is KCK a satellite city
http://en.wikipedia.org/wiki/Bats_Exchange,_Inc

[brewcrew1000]

Bats doesn't really have any overhead though, they have no product, they are just the exchange, they don't have any risk losing money in the market, in fact when the markets drop they are actually busier.

I also thought there were rumors the company might go public.

[Pork Chop]

Yeah, I don't know the real reason for the move to Lenexa, but it would be nice if they did move DT in the future.

I have read that they may go public as well. Some of the very same investors in Bats are investors in Chi-X as well. What I read was that the investors want Bats to go public so they can get some of their money of them.

Bats doesn't really have any overhead though, they have no product, they are just the exchange, they don't have any risk losing money in the market, in fact when the markets drop they are actually busier.

I also thought there were rumors the company might go public.

[FangKC]

BATS Global receives key clearance on European purchase

Bats said it will combine Chi-X-Europe ... Bats said.

http://www.kansascity.com/2011/11/25/32 ... rance.html

[FangKC]

I agree it's a shame that they are in Lenexa, but I am sure it's due to cost, since they are in a very cost conscience industry i.e. equity trading.

I don't know if they would want to be acquired by NYSE or NASDAQ, since they built their business to compete against the duopoly. However, money does talk and it would be a shame if they were. I would rather have a the third largest U.S exchange based her in KC. Downtown would best though in order to create a larger financial district.

It would be great if BATS came downtown, and we could also get the Kansas City Board of Trade back downtown at some point as well. Perhaps they could share a new building on that block of Grand between 10th and 11th streets. To complete our financial district, American Century and Waddell & Reed could move in the future as well to a new building in the North Loop.

[bobbyhawks]

It would be great if BATS came downtown, and we could also get the Kansas City Board of Trade back downtown at some point as well. Perhaps they could share a new building on that block of Grand between 10th and 11th streets. To complete our financial district, American Century and Waddell & Reed could move in the future as well to a new building in the North Loop.

+1

[phxcat]

I agree it's a shame that they are in Lenexa, but I am sure it's due to cost, since they are in a very cost conscience industry i.e. equity trading.

I don't know if they would want to be acquired by NYSE or NASDAQ, since they built their business to compete against the duopoly. However, money does talk and it would be a shame if they were. I would rather have a the third largest U.S exchange based her in KC. Downtown would best though in order to create a larger financial district.

It would be great if BATS came downtown, and we could also get the Kansas City Board of Trade back downtown at some point as well. Perhaps they could share a new building on that block of Grand between 10th and 11th streets. To complete our financial district, American Century and Waddell & Reed could move in the future as well to a new building in the North Loop.

Lets go, Devin!

[Pork Chop]

It would be great if BATS came downtown, and we could also get the Kansas City Board of Trade back downtown at some point as well. Perhaps they could share a new building on that block of Grand between 10th and 11th streets. To complete our financial district, American Century and Waddell & Reed could move in the future as well to a new building in the North Loop.

+1

+2

[brewcrew1000]

Did anyone happen to see that 60 Minutes last week which talked about Michael Lewis new book called Flash Boys. Bats Exchange received a lot of heat in it because Lewis is basically say that Bats is creating an unfair edge for high frequency traders.

Here is another heated debate with Lewis, Bats CEO and basically a whistleblower who created his own fair exchange and made his excahnge look really good in the 60 minutes interview

http://www.cbsnews.com/news/is-the-us-s ... et-rigged/
http://blogs.marketwatch.com/thetell/20 ... am-obrien/

[KCMax]

2-3 years ago I was talking to a friend who knew a head guy at BATS and was explaining to me high frequency trading. I, knowing little about Wall Street, figured it was just a clever way to gain an advantage in the system and didn't even consider it was frontrunning.

[pash]

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[KCMax]

The term "front-running" has a long-established definition in securities law, and it's not what HFT firms do.

Please explain, I don't know much about this stuff.

[bobbyhawks]

The term "front-running" has a long-established definition in securities law, and it's not what HFT firms do.

It sounds like it is essentially a technology arms race. While the information used to "front-run" may technically be "available to everyone," there are privileged people who pay to get in line to see the information first. If there are tiers of information availability before something becomes available to the non-insider public, then the we are in no way a free market. If this type of behavior happened anywhere else but the stock market, people would call it stealing, or pirating, or hacking, or simply unfair. There is certainly some element of taking advantage of the situation to all market moves, but continually jumping to the front of the line allows for the financial sector to be a giant bubble-creating leach on the economy, providing no value to regular investors. I've heard it compared to a tax on regular investors and to a vig in gambling. Both may be true. The HFT sytems also allow traders to find the buy thresholds of other investors and to play off them. There isn't much in the way of private strategy that can't be in some way discerned by those systems.

There is a pretty interesting description I just found from 2010. I know nothing about the author, but it sounds like she was on top of this 4 years ago:
http://www.webofdebt.com/articles/compu ... unning.php

[pash]

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[bobbyhawks]

Thanks for the detailed explanation. I get that it is not the same as traditional front-running, but it is in a really grey area for me that borders on insider trading. I don't get how paying $300 million to put down a fiber network should allow you a multi-billion-dollar-a-year time advantage that is based on intercepting other people's strategic intent to purchase something. In an area where everyone is supposed to have access to the same information and where there are so many rules regarding pricing, there is somehow a loophole that allows the wealthiest companies to Office Space the economy.

A future of one supercomputer trading against another supercomputer is not the market freedom I think most people envisioned. Since the decision-making is mostly done via advanced modeling and what is essentially poaching of information, the technological divide and complexity built into trading structures further separates the insiders from the upstarts and small-time investors. As these systems and networks become even more sophisticated, how is a regular individual or a startup company supposed to feel comfortable investing as built-into-the-market advantages are accumulated en masse by those who seek to exploit them?

[pash]

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