Bats Europe’s Pricing Tactic Aims to Draw Orders from LSE
From Wall Street Journal Online:
Alternative trading system Bats Europe is planning to challenge London Stock Exchange Group with a new pricing plan next month for U.K. stocks, which it hopes will attract orders from the LSE.
Bats Europe said Tuesday it will invert its U.K. prices next month, meaning the firm will pay clients more for adding liquidity than it charges them to remove liquidity. The pricing tactic has proved successful for the firm in Europe and for its parent Bats Global Markets Inc. in the U.S.
Starting Sept. 1, Bats will pay a rebate of 0.004 percentage point on U.K. trades for adding liquidity and will charge 0.002 percentage point to remove. It won’t charge any fee for customers trading more than an average of £50 million ($82.8 million) a day.
This means Bats Europe would give clients £4 for every £100,000 of business they post on the system, while it will charge a smaller customer £2 — or a larger trading firm nothing — when it takes the other side of the trade.
The move coincides with the LSE’s plan to dump its rebate and fee model — known as “maker taker” — on Sept. 1 and start charging fees on both sides of the transaction.
“Many of our customers are disaffected with the LSE decision to drop the maker taker and we see this as an opportunity to dramatically increase our U.K. market share,” said Paul O’Donnell, chief operating officer of Bats Europe. “We are hoping to boost our share to as much as 10% by the end of September.”
Bats Europe was trading about 4.4% of FTSE 100 equities this week compared with the LSE’s 66%, according to Bats data.
A spokesman for the LSE wasn’t available for comment.
The Bats pricing tactic has helped boost the firm’s trading activity in Europe, where it introduced a similar policy for French, Dutch and Belgian stocks in June, and in the U.S. where inversions in January and September 2007 established the platform in its home market.
The Bats move came just a day after rival exchange Turquoise, which is owned by many of the same investment banks, said it is putting itself up for sale. Turquoise has sent sales prospectuses to 18 possible buyers, including the LSE and Bats Europe.
Turquoise is part of an effort by the banks to gain more control over the cost of buying and selling stocks in Europe’s financial markets. But the exchange has had a hard time making significant inroads since its launch last autumn.
Write to Luke Jeffs at luke.jeffs@dowjones.net
Corrections & Amplifications
Under a new pricing plan, Bats Europe would give traders £4 for every £100,000 of business they send into the exchange’s system. A previous version of this article incorrectly said the rebate would be £4 for every £1,000.
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