Bats to close its doors to thinly-traded stocks

Bats to close its doors to thinly-traded stocks

Bats Global Trading is to close its doors to illiquid stocks, in an initiative intended to address fragmentation of pricing for issuers of thinly-traded securities.

In a letter to shareholders and market participants, new CEO Chris Concannon says Bats will file a rule with the SEC proposing that thinly-traded stocks are only offered by the exchange on which they are publicly listed.

"We believe that concentrating displayed liquidity in thinly traded stocks at a single venue will enable market participants to more efficiently form prices, and that one venue also will be better able to innovate their markets specifically for thinly traded stocks (i.e., tick size, auctions, etc.)," writes Concannon. "We view this proposal as a non-disruptive modification to US equity market structure that Bats, other exchanges and the industry at large can implement with very little technical impact to the industry and its many participants."

The proposals would likely affect circa 500 stocks, that would in future only trade on the Nyse or Nasdaq.

Concannon's solution comes as US investors and regulators continue to lament the complexities of attaining best price execution in a badly-fragmented market.

The Securities and Exchange Commission is currently pushing ahead with a more disruptive pilot project to trade some illiquid stocks in five-cent increments, rather than one-cent increments.

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