ISEEE Presentation – April 6, 2014
Agenda 1. In the News 2. Brief History of BATS 3. Direct Edge Merger 4. U.S. Equities 5. Europe Equities 6. Other Businesses 7. Regulation 8. Q&A 2
Corporate Overview BATS Global Markets Ownership BATS Global Markets Snapshot • Headquartered in Lenexa, KS • 296 Employees • 100 in Kansas • 58 in London • 130 in New Jersey • 6 in New York Follow us on Twitter 7 Large Banks 2 Private Equity @BATSGlobal 1 Clearing Firm 2 Market Makers 1 Prop Broker 3
Building a Track Record of Success BATS Launches Global U.S. Daily Markets primary volume ranks as Acquires listing BATS Chi- BATS and BATS goes BATS record world’s 3rd Chi-X venue with X Europe Direct Edge live in processes of 1 billion largest Europe, 9 new earns complete January 500 million shares in stock becoming iShares exchange merger, shares for January exchange the largest ETFs status and becoming Daily the first operator by BATS pan- Key Events launches top market volume time, less BATS notional Options European Completes European for ETF BATS record of than 18 Exchange value and second trading seamless ETF and and retail- Trading, 100 million months BATS and BATS traded for U.S. equity center by Chi-X trade driven Inc. shares in after Europe go the first exchange value Europe reporting liquidity formed November launch live time go live traded integration businesses 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 Direct Edge Market Applied for Announced BATS Key Events Launched Earned one Spun off Received Announced Launched share exchange plans to chooses as Direct point and added SEC intentions to EdgeRisk growth status merge with Equinix Edge ECN market Goldman approval launch in Controls accelerated BATS NY5 for under share in Sachs and and Brazil Global long term Knight first year Citadel as launched Introduced Acquired Markets data center Capital trading investors exchanges Developed Retail Order ISE Stock strategy, with new Connectivity Designation Exchange Released secures CEO technology & Member Direct Edge innovative William and data Services Order Type customer O’Brien center Guide pricing deal joins the company 4
Direct Edge Merger Overview Creates the 1 st or 2 nd largest global equities exchange operator n Jan 2014 U.S. Market Share: NYSE : 20.58%, BGM: 20.54%, NDAQ: 20.01% n Market Expanded scale, market share and efficiencies of combined company will create n Positioning greater ability to innovate and compete Dedicated Institutional Focus n Broader competitive services for customers n (e.g., market data competitive with that of NYSE and NASDAQ) Diversification All four U.S. equity exchanges – BZX, BYX, EDGX and EDGA – will remain in n of Revenue operation providing a stronger customer value proposition, with different Streams pricing models and functionality Potential for reduced long-term costs for customers by reducing capital n expenditures, redundant systems, data costs, and operating costs Synergy Opportunities Both BATS and Direct Edge were founded to challenge the U.S. exchange n Shared duopoly and increase efficiency for end-users Innovative Shared history of market innovation, service and competitive pricing n Culture 5
Top Global Exchange Operator Global Cash Equities Exchanges by Monthly Notional Value Traded ($ in millions) 1,600,000 1,391,861 1,400,000 1,306,737 1,285,522 1,200,000 1,000,000 800,000 542,978 600,000 362,540 400,000 225,369 193,570 134,200 200,000 115,606 101,494 0 NYSE BATS Global NASDAQ Tokyo SE Shenzhen Shanghai SE London SE Hong Kong TMX Group Korea Euronext Markets OMX Group SE Group SE Exchange ____________________ Source: World Federation of Exchanges, BATS Global Markets. 6 Note: Monthly notional value traded through January 2014.
U.S. Equity Market Share by Venue OTHER, 1.45% NASDAQ, 20.01% TRF, 37.43% 20.54% NYSE, 20.58% 7 Source: BATS Internal January 2014
Four U.S. Equity Exchanges The merger of BATS and Direct Edge combines two highly complementary firms dedicated to customer-focused principles, products and pricing that have been the foundation for our individual success. Together, we have designed a market model that provides customer choice, low cost and technology compatibility . EDGA BYX EDGX BZX Key Differentiators Routing, Low Retail Price Hidden Price Retail, Attribution Cost Improvement Improvement Statistics average 30+ mils 33% of orders are more than 7% of 40 unique of price retail/wholesale; inbound executed strategies improvement 9% attributed orders receive PI Recent Market Share 1 2.75% 2.04% 7.53% 8.07% “Taker-Maker” “Taker-Maker” Traditional Traditional Pricing Model with low fee and with low fee and “Maker-Taker” “Maker-Taker” rebates rebates model model Pricing for 5 to 6 0 to 3 (20) to (35) (20) to (32) Adding Liquidity 2 Pricing for (2) (1) to (3) 29 to 30 30 Removing Liquidity 2 Exchange Code J Y K Z ___________________ (1) BATS Data, February 2014 8 (2) As of February 2014, per 100 shares, parentheses represent rebate.
Complimentary Liquidity EDGA/BYX/BZX EDGX Retail/ Wholesale 3% Automated Market Maker Agency Agency 15% Other 3% Proprietary 15% 11% 9% Retail/Wholesale 29% Automated Market Maker 34% Bulge Bracket Proprietary Bulge Bracket 27% 20% 31% Other 4% Source: Percentages represent add and remove volume based on BATS and Direct Edge Internal Data for Q1 2014. BATS categorizes its members into segments on a best efforts basis according to its view of each Member's business model. For definitions of each segment, please click here. 9
Top Retail Destination Limit Orders on EDGX Exchange EDGX Retail Broker Limit Order Routing Q3 Rule 606 Reports – EDGX Rank Among Exchanges Agency 13% NYSE- NASDAQ- Broker Listed Listed Proprietary 11% Retail 18% #1 #1 Market Maker #1 #1 10% Other #1 #1 1% Wholesaler 19% #1 #1 Bulge Bracket 28% BATS BYX Retail Price Improvement Program – ~3.5 million shares per day executed in RPI program – $.0030 of price improvement on average (35 in Feb so far) 10 ____________________ Source: Direct Edge, SEC Rule 606 Public Disclosures
ETF Volume Leader BATS leads all other exchanges in ETF volume. Other 2% NASDAQ TRF 17% 33% NYSE Arca 22% 26% 11 Source: ETF Data Provided by Arca Vision / BATS data as of Y/E 2013
European Equity Market Share ITG Dark, 0.84% UBS Dark, Other Dark, SIGMA X 1.40% 1.56% Dark, 0.69% NASDAQ, 5.82% SWISS SIX, 6.42% BATS, 22.10% Turquoise, 7.25% Other Lit, 7.80% LSE, 19.97% DB, 11.40% NYSE, 14.70% 12 12 Source: BATS Internal Jan 2014
Other Business Units Approximately 20 listings, currently focused on exchange traded products § Unique market structure with complimentary competitive liquidity provider § Listings programs, which provides more consistent market quality than other exchanges § Launched February 2010 § Maker/Taker pricing structure § Approximately 3 – 5% market share U.S. Options § No fees for individual consumption of market data § Connectivity to multiple liquidity centers for inbound and outbound order routing Market Data & § Consolidating data centers 1H 2015 to lower member costs and provide greater Connectivity cost certainty Services 13
Our Market Structure Principles • Monopolies are not the answer – But exchanges need to communicate and coordinate better • All market participants should focus on reducing IT and operational risks • Regulators must have info they need to deter bad conduct • Investors should know where their orders are routed – This is in addition to knowing where they are executed • Market structure should be re-visited for small caps • A national “depth of book” feed should be created – The importance of depth-of-book information – The concern about informational advantages – This should be worked on while strengthening the current SIP All reforms should be targeted, with the objective of improving investor confidence 14
Our Views on the Issues • Internalization/Maker-Taker/Payment for order flow – An exchange is not always the best place to execute a trade – Restrictions on payment will disadvantage retail & institutions • Pennies, Nickels, etc. – BGM is working with the SEC around a potential industry wide tick pilot – To work best, any pilot should be simple and respect existing business models • Dark Pool Regulation – Dark pools serve a purpose but some have gone too far – Greater transparency of order routing and business practices • “Complexity” – A simpler market is not the answer, but we must act responsibly – Rules/order types should be right-sized and easy to understand 15
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