BATS Offers Free ETF Listings, Sort Of

February 10, 2012

The BATS exchange’s free ETF listings offer is great—if a fund even qualifies.

BATS Global Markets, the third-largest U.S. stock exchange, is putting the heat on the New York Stock Exchange and Nasdaq by waiving annual listing fees for ETFs with average daily trading volume of more than 2 million shares.

Fund sponsors listing ETFs on BATS will need to cross that crucial 2 million share barrier to get the best deal, because it appears Nasdaq has the cheapest listing fees of any of the three exchanges. Nasdaq charges a $5,000 initial-listing fee, and its annual fees range from $6,500 to $14,500 a year, according to a Nasdaq official.

BATS will charge an initial listing fee of $10,000, and those ETF sponsors whose funds don’t break the 2 million-share barrier in average daily trading volume will have to pay a $35,000 per-year listing fee, according to information BATS provided in a press release. The catch is that only about 5 percent of U.S.-listed ETFs qualify for the free deal.

For its part, the New York Stock Exchange, whose electronic trading platform Arca is home to about 90 percent of all primary ETF listings, charges anywhere from a $7,500 to a $10,000 initial fee and anywhere from $5,000 to $55,000 in annual listing fees depending on the fund, according to information provided by NYSE officials.

BATS’ debut as a primary-listing venue is stirring up the world of exchanges that is still adjusting to the rise of electronic trading that helped put an end to the NYSE's dominance. But in all the jostling that’s been going on since the NYSE stopped ruling the roost, it’s not clear whether investors might reap any of the savings.

BATS’ Offer In Context

 

While the free listings that Kansas City, Mo.-based BATS offers certainly sounds enticing, it’s worth noting that just 73 of the nearly 1,400 U.S.-listed ETFs would even qualify, according to data compiled by Markit, a financial industry data firm.

In other words, just about 5 percent of U.S.-listed ETFs have average daily trading volume of more than 2 million on a rolling 60-day basis. That two-month requirement is much the same as what BATS requires.

Officials at BATS weren’t immediately available to elaborate beyond the press release, and it’s entirely possible that part of the company’s reticence has to do with the fact that the company is in the middle of going public.

The six-year-old company, which accounts for about 11 percent of U.S. equity trading, filed an “S-1” registration statement to offer shares to the public in May of last year.

iShares, the world’s-largest ETF provider, became BATS’ first client last month, and has launched a total of nine single-country ETFs on BATS in the past month.

“Our aggressive pricing and innovative market maker program will appeal to small and mid-cap companies looking to grow, while larger companies will be attracted to our no-fee listing model,” Joe Ratterman, chairman and CEO of BATS, said in a press release.

 

 

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