BATS Showing ETF Incentives Work

December 15, 2015

BATS Global Markets is aggressively seeking new ETF listings. This fall, the Kansas City, Missouri-based exchange implemented an incentive program that offers ETF issuers anywhere from $3,000 to $400,000 a year per fund listed on BATS, based on volume thresholds. That’s unheard of in an industry known for having issuers be the ones paying to list.

Since its inception in October, the BATS ETF Marketplace program, as it’s called, has proven effective, attracting more than a dozen new funds to BATS’ board from issuers such as iShares, WisdomTree and Elkhorn.

Aside from a growing number of listings, today BATS commands nearly half of all ETF trading taking place on exchanges—an impressive feat for an exchange that not long ago was under high regulatory scrutiny for its reliance on high-frequency trading firms, and it even settled one SEC investigation by paying a $15 million fine earlier this year.

Now, BATS is showing it’s ready to gain market share, one ETF listing at a time. We caught up with Laura Morrison, senior vice president and global head of exchange-traded products for BATS, to talk about what’s going on in Kansas City. Before BATS implemented an ETF-listing incentive program this fall, what was the biggest challenge to attracting ETF listings to the exchange?

Laura Morrison: I would say the largest challenge to attracting ETF listings and new issuers who hadn't tried BATS in the past was, frankly, building that relationship, that trust and that confidence in our marketplace. It's a highly competitive environment in terms of looking to win listings. But we felt at BATS that we could provide better services on both the pre-launch experience and the post-launch commitment. What other advantages or benefits do issuers get from listing on BATS as opposed to Nasdaq or NYSE Arca, beyond the incentive?

Morrison: We certainly compete in price. We have the ability to do that because of our low-cost structure within the BATS organization. We have fewer than 300 employees across the entire company, so we can do things from a pricing perspective that arguably our competitors may not do or may not be willing to do.

Pricing aside, it's about confidence in our systems, reliability, uptime. The capabilities of our low latency is why market makers decide to route here—they’re looking for the best market quality and speed of trading.

We also work on behalf of issuers with products that are a little more difficult to bring to market. As you know, there are 1,800 products out there. A lot have already been done. So, the new and unique-type products take a little bit more time and attention from both the business side of the ETF team as well as our counsel. We are committed to that process.

Find your next ETF

Reset All