BATS takeover of Chi-X cleared

Nov 25, 2011
<p>New exchange BATS Chi-X Europe will process 25 percent of all European equities trading</p>

BATS Global Markets has received clearance from the UK’s competition authorities to take over rival Chi-X Europe, the region’s largest trading venue.

The US-based group plans to merge its European arm with Chi-X to create a new exchange – to be called BATS Chi-X Europe – that will process around 25 percent of European equities trading.

‘We will now focus on completing the combination of BATS Europe and Chi-X Europe to create an even more formidable competitor in pan-European securities trading, offering greater market efficiencies for the entire investing community,’ comments Joe Ratterman, chairman and chief executive of BATS Global Markets, in a statement.

BATS Europe and Chi-X Europe both launched following legislation in 2007 ‒ the Markets in Financial Instruments Directive ‒ which opened up the trading industry to more competition.

Chi-X Europe has been particularly successful and in the third quarter of 2011 accounted for roughly 20 percent of total European equities trading.

Surprise review

The $300 mn takeover of Chi-X Europe by BATS, announced in February this year, was thrown into doubt following a surprise decision by the UK’s Office of Fair Trading (OFT) to refer the bid to the Competition Commission.

At the time, the OFT said it could not rule out ‘a substantial lessening of competition’ in the market for UK equities trading.

The Competition Commission, however, concluded this would not be the case, as customers could easily take their business elsewhere if the combined exchange raised fees or reduced its level of service.

BATS Global Markets launched in the US in 2005, where it operates two exchanges that account for 12 percent of equities trading.

The group plans to launch a primary listings venue in the US by the end of this year to rival NASDAQ and the NYSE for IPOs.

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