A year after becoming an equities exchange, BATS plans to grab a chunk of the options market through aggressive pricing that appeals to some of the same automated liquidity-providing firms that helped make it the third-largest exchange operator in U.S. equities. The firm expects to launch BATS Options Exchange early next year.
"Compared to our competitors in this space, we’re lean, based on our direct monthly expenses and capital outlay to get into options, so we’re operating on a different scale than other exchanges," said Joe Ratterman, CEO of BATS Exchange. "Because of that, we can be aggressively priced." BATS Options will have maker-taker pricing in a price-time market model.
"If history is any guide, they’re very aggressive with their pricing metrics, and will enter the options space with a pricing structure that will undercut the competition and will attract interest and competition from trading entities," said Andy Nybo, a principal at research firm TABB Group.
Ratterman expects BATS’s eventual options market share to equal its share in equities. In June, BATS was 10.7 percent of equities volume.
"We wouldn’t be going into this market if there wasn’t a big opportunity for BATS to come in, make improvements and gain market share," Ratterman said. "U.S. equities was one of the most competitive markets in the world. … There’s nothing to keep us from being successful in options."
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