Better Alternative Trading System (BATS) Definition

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Better Alternative Trading System (BATS) Definition

What Is Bats Global Markets?

Bats Global Markets was a US-based exchange that traded a variety of assets, including stocks, options, and foreign currency. It was formed in 2005 and was purchased in 2017 by Cboe Options Exchange (Cboe). Prior to its acquisition, Bats Global Market was one of the major US exchanges, well-known for its services to broker-dealers, individual and institutional investors, and other financial institutions.

Key Takeaways

  • When the exchange expanded into European markets in 2008, Better Alternative Trading Systems was renamed as Bats Global Markets.
  • In 2017, CBOE purchased Bats and moved three of its exchanges to the Bats Global Markets platform.
  • Prior to the takeover, Bats had grown to become one of the world’s biggest exchanges, listing stocks, options, ETFs, and foreign currency.

Understanding BATS

Bats Global Markets was once known as Better Alternative Trading System (BATS) and was first marketed to investors as a firm that was more creative than conventional exchanges. When the business entered the European market in 2008, it was renamed Bats Global Markets.

As an exchange, Bats came to be the principal rival to the New York Stock Exchange (NYSE) and Nasdaq, both of which handled more shares as measured by market capitalization. Bats was the second-biggest U.S. equities exchange by market share in 2016 and the largest exchange-traded fund (ETF) exchange.

Its BZX Exchange became a recognized exchange in the United States in 2008, and its BYX Exchange debuted in 2010. Bats combined with and acquired numerous exchanges between 2011 and 2015. It bought Chi-X Europe in 2011, making it the biggest stock exchange in Europe. A merger with Direct Edge in 2014 created the EDGA and EDGX exchanges. Bats purchased Hotspot, an electronic communication network (ECN) that provides institutional investors with spot trading, swap execution, and forward trading services, in 2015.

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BATS vs. Cboe

BATS has faced a number of significant technological challenges throughout the years. In 2012, the firm attempted to go public via an initial public offering, with shares listed on its own market. This project was abandoned after a significant technical fault caused its IPO price to plummet from $16 per share to $0.04 per share.

In 2013, the business disclosed that a technological issue caused hundreds of thousands of deals to execute at prices lower than the best bid and offer, affecting investors who were selling shares short. The miscalculation had an impact on deals dating back four years.

In 2017, Cboe, the owner of the Cboe Options Exchange and the Cboe Futures Exchange (CFE), launched a bid to buy Bats Global Markets. Cboe was able to grow into Europe and extend its products to include foreign exchange and ETFs as a result of the purchase. Cboe today runs four US options markets, the Cboe Futures Currency, a European equity market, four US equity markets, and a foreign exchange market. Prior to purchasing Bats, Cboe operated three exchanges, three of which switched to the Bats trading platform.

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