BATS Regroups After Big Systems Glitch

BATS Global Markets is still reeling after a trading glitch last Friday embarrassed the exchange and led to the cancellation of its initial public offering as the company began trading on its own exchange.

In a letter to customers sent on Sunday, Joe Ratterman, the company’s chief executive officer, admitted BATS experienced a serious technical failure on Friday morning and said there were no excuses for the snafus.

“We owe it to all of you to do better and we will work even harder to earn your trust and confidence in the months and years ahead,” Ratterman said. “Despite the setback we suffered last week, we intend to build on our long track record of success and keep moving forward.”

BATS withdrew its initial public offering on Friday after it failed to properly roll out its own ticker symbol on its first day of trading. The IPO could still happen, perhaps as early as next quarter.

Technical problems on the same day as the IPO failure also led to the suspension of trading in technology giant Apple.

Tim Mahoney, CEO of alternative trading system BIDS Trading, said the timing of the problems was unfortunate for BATS. But he didn’t believe the glitch would derail the growth of electronic trading, which has become the standard.

If anything, the incident with Apple proved that the changes put in place following the “flash crash” of May 6, 2010 have worked, Mahoney said. The proposed limit up limit down rule could make things even better, he added.

“Markets going forward are always going to be a mix of people and technology,” Mahoney said. “It’s unfortunate that they had a software glitch that became so visible, but there are software glitches and problems in technology for everybody.”

Prior to the debacle, BATS had announced the offering of about 6.3 million shares of its common stock to the public at $16 per share. That had been on the low end of an offering originally expected to draw between $16 and $18 per share. Before its stock was halted on Friday, BATS was briefly trading at only pennies a share.

David Cummings, chairman of the board for Tradebot systems, who also founded BATS and sits on its board, said he felt BATS should develop a plan to go public in the second quarter. He called the glitch “a freak one-time event,” and noted that the BATS matching engine has matched billions of orders in the past without problems.

“Over the past decade, electronic trading has brought huge savings to investors,” Cummings said in an e-mail. “When the public wants to invest, they can push a button and get a fair fill in less than a second. The markets will never be perfect, but the reality is that they work very well.”