Bats Global Markets Inc. on Tuesday unveiled a plan to improve the $24 trillion U.S. equity market.
The Lenexa company suggested a reduction in fees for buying and selling some stocks that could produce industry savings exceeding $850 million for the most-active shares.
Bats also said there should be a review of how brokers report where they send stock orders and what standards they use in making those decisions.
The suggestions follow a set of proposals the owner of the New York Stock Exchange has been circulating among asset managers and broker-dealers in recent months. Bats and NYSE each handle about one-fifth of the nation’s trading, but their visions of how to improve the stock market differ. Bats rejects a NYSE suggestion for a rule that would steer more trading away from off-exchange platforms such as dark pools.
“While exchanges, including Bats, would stand to benefit from increased volume directed to them, and brokers would benefit from a reduction in exchange fees, investors will likely pay more both in the form of potentially wider spreads as well as fewer and inferior execution choices resulting from restrictions on competition,” Bats chief executive officer Joe Ratterman wrote in a letter released Tuesday.
Dissatisfaction with the status quo in the U.S. stock market — where trading is distributed across 11 exchanges and dozens of alternative venues — has grown in the past year, with critics alleging current incentive programs prompt traders to make decisions that disadvantage investors. Mary Jo White, who as head of the Securities and Exchange Commission oversees trading, is forming a committee of industry experts to help advise regulators on issues facing the U.S. equity market.
Ratterman’s comments come weeks after Bloomberg News reported on attempts by NYSE’s owner, Intercontinental Exchange Inc., to drum up support for its own plan to overhaul the stock market.
NYSE hopes to win enough support to take the plan to regulators for formal approval, according to brokers who have spoken to exchange officials. The NYSE proposal would cut exchange trading fees to 5 cents per 100 shares from the current 30 cents, according to the person who saw the memo.
Bats also suggested a 5-cent fee for some stocks, but it said the price should be different for other shares, depending on the amount of volume. Unlike NYSE, Bats wants to maintain the system known as maker-taker through which exchanges pay rebates to traders that provide liquidity.