Better Alternative Trading System (BATS)

The Better Alternative Trading System (Bats) is a U.S.-based stock exchange offering investors equities, options, and foreign exchange trading services. The BATS operates in both the United States and Europe.

The Bats is a U.S.-based exchange founded in 2005. When the exchange entered the European market in 2008, it was rebranded as Bats Global Markets. Bats provides services for broker-dealers as well as retail and institutional investors.

Bats was initially branded as an alternative trading platform and marketed itself to investors as a company that is more innovative than established exchanges. As an exchange, it competes with the New York Stock Exchange (NYSE) and Nasdaq, both of which handle a greater amount of equities when ranked by market capitalization. In 2016, the company was the second largest U.S. equity exchange by market share and was the largest exchange-traded fund (ETF) exchange.

Bats operates exchanges used to trade stocks, options, and foreign exchange. In the United States, its BZX Exchange became a registered exchange in 2008, and its BYX Exchange was launched in 2010. Between 2011 and 2015, Bats merged with and acquired several exchanges. In 2011, it acquired Chi-X Europe, making it the largest stock exchange in Europe. In 2014, a merger with Direct Edge added the EDGA and EDGX exchanges. In 2015, Bats acquired Hotspot, an electronic communication network (ECN) allowing institutional investors spot trading, swap execution, and forward trading services.

Bats has experienced several notable technical hurdles over the years. The company sought to go public in 2012, with shares being offered on its own exchange. This effort was scrapped when a serious technical issue resulted in its IPO price tumbling from $16 per share to $0.04 a share. In 2013, the company indicated that a technical error led to hundreds of thousands of trades executing at prices lower than the best bid and offer, which also affected investors who were selling shares short. The error affected trades going back four years.

In February 2017, Bats Global Markets was acquired by CBOE Holdings, Inc., the owner of the Chicago Board Options Exchange (CBOE) and CBOE Futures Exchange (CFE). The acquisition allowed CBOE Holdings to expand into Europe and increase its offerings to include foreign exchange and ETFs. CBOE now operates four U.S. options markets, CFE, two European equities markets, four U.S. equities markets, and two foreign exchange markets. The three exchanges that CBOE operates will migrate to Bats’ trading platform.