In a rare move for a stock market operator, BATS Global Markets
Inc. is suggesting some stocks shouldn't trade on BATS
exchanges.
Chris Concannon, newly appointed CEO and president of BATS, said
the company was planning to file a new proposal to the Securities
and Exchange Commission that would require thinly-traded stocks to
trade only at the exchange where they are publicly listed.
That would mean more than 500 stocks would trade only on the
exchanges operated by the New York Stock Exchange and Nasdaq OMX
Group Inc., he said in an interview. There are roughly 8,000 stocks
and exchange-traded funds traded on exchanges in the U.S.
Mr. Concannon announced the proposal in a letter to employees
and market participants, saying the rule would "enable market
participants to more efficiently form prices" in those stocks.
In an interview on Thursday afternoon, he said the idea was
meant to help make the U.S. stock market simpler without trying to
implement wide-ranging, potentially disruptive changes.
"We believe that small incremental changes are what the market
can use today, not major market structure reform," he said.
The proposal comes as exchanges work out the details of a
SEC-led pilot project to trade some illiquid stocks in five-cent
increments, rather than one-cent increments. The number of stocks
affected by the pilot project would be much larger than BATS's new
proposal.
"We view the BATS Exclusive Listing Proposal as a potentially
critical step toward de-fragmenting trading volumes of illiquid
securities, for the benefit of all investors, and, particularly,
for issuers of these low-volume stocks," Mr. Concannon wrote in the
letter.
Critics of the U.S. stock market structure have long lamented
its "fragmented" nature. A stock can be traded on any of 11 stock
exchanges and more than 40 private trading venues, such as dark
pools operated by large banks.
BATS would lose a minimal amount of revenue from the proposed
change. The CEO said he hadn't sought out opinions on the proposal
from NYSE President Tom Farley or Nasdaq CEO Robert Greifeld
because he wanted the idea to be debated publicly. NYSE declined to
comment and Nasdaq couldn't be reached immediately for comment.
The rule would only affect trading of those thinly traded stocks
on exchanges. They could still be traded on private venues, Mr.
Concannon added.
If the rule was passed, NYSE and Nasdaq could experiment with
other changes to trading of those stocks to boost trading, such as
having periodic auctions or wider tick sizes.
Write to Bradley Hope at bradley.hope@wsj.com
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