Chi-X, an aggressive alternative trading system in London that has snatched volume from some of Europe’s largest exchanges, will soon have to contend with a new competitor that’s been battle-tested in the U.S. BATS Trading plans to launch a multilateral trading facility in London before the end of this year.
Joe Ratterman, chief executive of BATS Trading, said the trading facility will most likely have maker-taker pricing, which pays firms to provide liquidity and charges those removing liquidity from its platform. “We will have innovative, aggressive pricing,” he said.
Chi-X Europe introduced maker-taker pricing for the pan-European securities it trades when it launched in April 2007. The platform is part of Chi-X Global, a unit of agency broker Instinet, which is owned by Nomura Holdings. After a year in business, Chi-X Europe represents about 5 percent of the European market’s trading turnover in euros.
BATS says it’s ready to compete with Chi-X. “Chi-X has a good business model,” Ratterman said. “But we’re potentially faster than Chi-X, and we’re significantly faster than the exchanges [in Europe]. Speed will carry a lot of weight for us.” Ratterman added that BATS also plans to route orders that it doesn’t match on its own book to exchanges and other trading venues. Chi-X declined to comment on its routing plans.
BATS expects to have a “few dozen firms” connected by the end of the year, Ratterman said. “It will be a very real launch. With the consortium behind us, investors will be ready to connect.” BATS Trading in the U.S. is owned by 11 firms, including Citi, Credit Suisse, Deutsche Bank and GETCO. Ratterman said BATS may allow additional owners for the European platform.
BATS, which will be based in London, will most likely start trading FTSE 100 names, before broadening to pan-European securities.