Bats releases new 'pre-routing display' system in face of Nyse opposition

Bats releases new 'pre-routing display' system in face of Nyse opposition

Bats Exchange has released Bolt (Bats Optional Liquidity Technology), a pre-routing display system designed to give its users an advanced peek at unfilled orders ahead of the wider market, despite opposition from rival exchange Nyse, which has written to the Securities and Exchange Commission calling for a review of the practice.

The Bolt system displays unfilled orders to the Bats community before either canceling those orders or routing to other markets.

Bats Only Bolt orders allow up to 500 milliseconds of additional order exposure on the Bats data feeds while routable Bolt orders expose an order to Bats members for up to 25 milliseconds before routing to away markets.

Similar mechanisms are already deployed at alternative trading venues such as the CBOE Stock Exchange and Direct Edge.

Nyse has objected to the strategy - and proposals to adopt similar tactics by Nasdaq OMX - claiming it offers preferential treatment to a select class of participants ahead of the wider market by effectively creating "additional dark liquidity that is available only to their own market participants".

In a letter to the SEC, Nyse's legal counsel Janet Kisane says that the delay in shipping orders flies in the face of Reg NMS which was introduced to guarantee best execution at the best price as soon as orders became available.

"Nyse Euronext believes that the time is ripe for the Securities and Exchange Commission to review not just the proposed Nasdaq and Bats functionality, but similar trading functionality used by registered alternative trading systems that provide non-public order information to a select class of market participants at the expense of a free and open market system."

In response, Direct Edge has slammed Nyse in a nine-page missive to the SEC. The ATS - which is currently applying for exchange status in the US - says Nyse's comments are "factually inaccurate, are logically inconsistent, and contradict their own market structures, prior policy statements, and marketing materials."

It described the products as part of a "broader strategic competitive battle regarding the liquidity-aggregation and other innovative products offered (by trading venues) to their customers".

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