(Updates with information about market-maker program in ninth and tenth paragraphs.)
Feb. 9 (Bloomberg) -- Bats Global Markets Inc., the exchange operator trying to lure U.S. corporations from NYSE Euronext and Nasdaq OMX Group Inc., said it won’t charge the biggest companies a fee to list shares on its venue.
Corporations and exchange-traded funds with average daily volume of 2 million shares won’t pay anything annually to list on the BZX Exchange, Lenexa, Kansas-based Bats said in a statement today. That compares with an annual expense of between $38,000 and $500,000 at the New York Stock Exchange and $35,000 to $99,500 at the Nasdaq Stock Market.
Bats, which has filed for an initial public offering, is stepping up its competition with NYSE Euronext and Nasdaq OMX. The two venues run by the six-year-old company accounted for 11 percent of U.S. equities trading last month, making Bats the third-largest exchange operator. It runs a U.S. options market and two European venues that have 24 percent of equity trading across the continent, more than London Stock Exchange Group Plc, Deutsche Boerse AG and NYSE Euronext, data from Bats show.
“This is a game changer,” Patrick Healy, who runs Issuer Advisory Group LLC, a consulting firm that advised Groupon Inc., Zillow Inc. and Level 3 Communications Inc. on where to list their shares, said in a telephone interview. “The concept of free listings is going to get a lot of attention from companies, given tighter IR budgets everywhere,” he said, referring to investor relations.
The universe of publicly traded companies Bats is targeting for free listings comprises about 600 U.S. exchange-listed stocks and ETFs, with a total market capitalization of $12.4 trillion, according to data compiled by Bloomberg. Bats will require securities to trade 2 million shares per day for two months to avoid a fee.
Issuer Advisory Group, which has offices in Chevy Chase, Maryland, and New York, has advised more than 100 companies with an aggregate market value of more than $500 billion since its founding in 1995, Healy said. He has advocated for free listings in letters to the Securities and Exchange Commission.
“Some will say they need the NYSE or Nasdaq brand affiliation, and that’s fine,” he said. “Many, many people will initially feel that way. This will trickle down and gain momentum at some point.”
Securities that switch from the New York Stock Exchange, NYSE Arca, NYSE Amex or Nasdaq Stock Market won’t be charged an initial transfer expense, Bats said today. Its initial fee for companies going public is either $50,000 or $100,000.
Bats also plans a new type of incentive program to push its market makers to compete more aggressively in less actively traded stocks. Approved securities firms can earn $100 or $250 a day per security, based on the size of the listed company, Bats said. The firm that supplies the largest number of shares each second at the best nationally available bid and offer will win the daily rebate.
The exchange will run 24,300 tests each day, or one at a random time every second, to calculate how market makers are performing, according to Bats’ rule submission to the SEC. Firms must win 10 percent of these tests to qualify for the money. The least-active securities will have two winners, with the first getting 80 percent of the available pool.
“We’re focused on driving competition and innovation in the U.S. primary markets,” Joseph Ratterman, chairman and chief executive officer of Bats Global Markets, said in today’s statement. “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.”
Bats, owned by a group of users including Citigroup Inc., Getco LLC, Credit Suisse Group AG and Bank of America Corp., delayed its IPO last year as U.K. regulators extended their review of its proposed acquisition of Chi-X Europe Ltd. The deal closed in November.
BZX Exchange began trading seven iShares ETFs from New York-based BlackRock Inc., the industry’s largest provider, last month. These include funds that track smaller stocks in Australia, Canada and Germany. Two more focused on Indian companies were introduced this month.
--Editors: Nick Baker, Jeff Sutherland
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