User Manual - BATS Exchange
Contents
1. Making Markets Better US Equities User Manual Version 1 0 0 August 20 2010 BATS US Equities User Manual Version 1 0 0 Contents IPO QUCHOM ERE TP PER aes Our MISSION Mr TE Become a Member dorada gh roh obi bof A DOR ide How BATS MOIS uitio cedi ape Dod SUL OUS MAR E a HA SO CORR TSCM OLOGY eoe DAR PURE uarie ERR betrug tst Pte etc Re a opt aa aaa Order Types and Related Information Bel BATS Order TYDOS oett et eite eec e dens lentes ot tua cede Re ee 6 2 Minimum Tradingdncremehl seo eer e o ee er e ps td PES e ed uns 6 3 Timein Force ValieS ics aeaaea e ERR Ee edit EROS AS REDE ADS si sei aca idas transando 4 BIRD af ans SR Re ee da aid de Sea aaa oe 6 5 Crossing lhe Market cnt re oer t oerte adieu ete na at ist 06 Price SIMON RS ST eee BT dc 6 9 c10 KO Co T ES GEMENS EE renes dae D Trading PIOUES RATE er te Leu c eb e c SER Holiday Schedule I O Clearly Erroneous Executions Policy lt OGonbicU BA TS de elec Pen CORA SD E OO O1 BR D a 00N BATS Exchange Inc 2010 Page 2 BATS US Equities User Manual Version 1 0 0 1 Introduction This document provides background information regarding BATS Exchange BZX BATS Y Exchange BYX and BATS Trading Inc together with BZX and BYX collectively referred to as BATS Information contained in this document is subject to change at any time For the latest updates2. please refer to http www batstrading com 2 Our Mission To make markets better BATS Trading Inc was incorporated in June 2005 in response to the rapid consolidation in the ECN space On August 18 2008 BATS Exchange Inc s registration as a national securities exchange was approved by the Securities and Exchange Commission and on October 24 2008 BZX commenced operations as a national securities exchange On August 13 2010 BYX s registration as a national securities exchange was approved by the Securities and Exchange Commission BYX plans to commence operations as a national securities exchange on October 15 2010 BATS believes competition drives innovation and that there should be a choice between multiple competing electronic markeis The Exchange s trading platform was built ffom the ground up to handle high speed high volume anonymous reliable trading of US equities We are rapidly working to enhance our product functionality We want to earn your business 3 Become a Member To be a Member of the Exchange s a firm must gt be registered as a broker dealer gt be a member of at least one other national securities exchange or national securities association gt be able to clear trades or must clear through a clearing firm gt meet certain additional criteria prescribed by the Exchange and set forth in Chapter Il of the Exchange s Rules Non Members may also gain access to the Exchange through a Sponsor
3. market to attempt to fill the order posted to the Exchange order book cancelled etc Full depth of book market data is available via the BATS TCP PITCH Multicast PITCH or TCP FAST PITCH compressed protocols Top of book market data is also available through the BATS TCP TOP protocol BATS does not charge Members or other data recipients to use its core real time market data However BZX does offer a fee based last sale product that contains only trade information not quotation information In addition the BZX last sale product BZX offers certain fee based historical data products through the BATS Web Portal Users or their clearing firms may request copies of their executions via the BATS DROP protocol This protocol works either in real time or in a batch mode 5 Technology The Exchange s trading platform is housed in a world class data center in Weehawken New Jersey maintained by SAVVIS Inc This facility is used to host multiple additional market centers The SAVVIS data center provides a high level of security and availability through redundant and reliable environment control systems redundant power supplies on site backup generators cooling systems etc Datacenter personnel are available 24 7 to maintain and service the system The Exchange s trading platform is distributed across several servers to maximize throughput minimize bottlenecks and allow for simplified scalability More servers can be added easily to expa
4. cessary to avoid crossing the market or resting at a price that would create a short sale test reject All pegged orders are ranked at a lower priority than non pegged orders Pegging may be used in conjunction with reserve and discretion Pegged orders are not routable and therefore must be BATS Only or BATS Post Only Midpoint Peg Orders have a lower priority than other pegged orders ranked at the same price 6 8 Throttles No guarantee is made about system performance especially during periods of high volatility and order traffic However the BATS system was designed to handle at least 500 orders per second per port while providing acceptable order acknowledgement times Users planning to send orders at a higher rate than 500 orders per second should make arrangements to connect to multiple ports and ensure they have an appropriate amount of bandwidth that will be required for their order flow 7 Connectivity Choices Users are responsible for choosing their telecommunications provider and arranging for connections to the primary data center in Weehawken New Jersey and the secondary data center in Nutley New Jersey Users are strongly encouraged to establish connectivity to both data centers to minimize service disruption in the event of an issue at either data center BATS supports the following connectivity methods gt Cross Connect Users that are co located in either data center may request an in house cross connect from the User s P
5. dule is subject to change 10 Clearly Erroneous Executions Policy The Exchange s Clearly Erroneous Executions policy is set forth in BZX Rule 11 17 and BYX Rule 11 17 The Exchange s rules are available at gt BATS Exchange BZX Rule Book gt BATS Y Exchange BYX Rule Book BATS Exchange Inc 2010 Page 8 11 Contact BATS Web Site Main Number Trade Desk Membership Services Billing Network Operations Career Opportunities FAX Mailing Address BYX Data Center BATS Exchange Inc 2010 BATS US Equities User Manual Version 1 0 0 http www batstrading com 913 815 7000 913 815 7001 tradedesk batstrading com 913 815 7002 membershipservices batstrading com 913 815 7003 billing batstrading com 913 815 7005 noc batstrading com jobs batstrading com Please send resume and a cover letter 913 815 7119 BATS Exchange Inc 8050 Marshall Drive Suite 120 Lenexa KS 66214 SAVVIS Inc Weehawken NJ Dan Diversey Sr Sales Executive Financial Markets 312 214 7912 Dan Diversey sawvis net Page 9 Revision History BATS US Equities User Manual Version 1 0 0 Document Date Description Version 1 0 0 08 20 10 Initial version 1 0 0 merging BATS Exchange BZX User Manual w BATS Y Exchange BYX User Manual BATS Exchange Inc 02010 Page 10
6. ed Participant arrangement with a Sponsoring Member firm in accordance with the Exchange s Rules Membership application forms as well as information and forms regarding sponsored access to the Exchange are available on the Exchange s website http www batstrading com Please contact BATS Membership Services at 913 815 7002 for more information about becoming a Member or a Sponsored participant BATS Exchange Inc 02010 Page 3 BATS US Equities User Manual Version 1 0 0 4 How BATS Works Users connect to the system via the FIX Order Handler using the industry standard FIX protocol with BATS Exchange specific extensions The FIX Order Handler validates incoming orders converts them to an internal proprietary format and forwards them to the appropriate matching unit At the core of the system are several Matching Units Each matching unit handles a bin of symbols which can be reallocated to balance the load across the system The matching unit compares the limit price of an incoming order with the price of resting limit orders on the Exchange Order Book and the price of other markets displayed quotes If the order is immediately marketable against the BATS Order Book and the BATS quote is equal to or better than the consolidated quote an immediate match is made and communicated back to Users If another market is displaying a better quote the order will be handled depending on a User s instructions e g forwarded to the other
7. nd system capacity Fast reliable data storage is provided by a Storage Area Network SAN 6 Order Types and Related Information 6 1 BATS Order Types BATS accepts limit orders and market orders Orders are limited to a maximum of 999 999 shares BATS Exchange Inc 02010 Page 4 BATS US Equities User Manual Version 1 0 0 Users may submit orders to the Exchange designated as IOC Day Good til Cancel Good til Day Good til Extended Day Reserve Odd Lot Mixed Lot BATS Only BATS Post Only Partial Post Only at Limit Pegged Mid Point Peg Discretionary Non Displayed Destination Specific Modified Destination Specific and or Intermarket Sweep Note that BATS Only and Post Only order types will only execute post on the BATS platform that is targeted by the User Refer to Chapter XI of the appropriate Exchange Rule Book for more information regarding order types gt BATS Exchange BZX Rule Book gt BATS Y Exchange BYX Rule Book Refer to the appropriate FIX Specification for more details on how various order types are implemented gt BATS Exchange BZX FIX Specification gt BATS Y Exchange BYX FIX Specification 6 2 Minimum Trading Increment Most stocks trade in increments of 0 01 However some stocks are eligible for trading in sub penny increments of 0 0001 Orders that are priced in increments finer than the minimum trading increment are rejected 6 3 Time in Force Values IOC immediate
8. oint of Presence PoP to BATS Extranet Providers BATS is currently on network with various extranet providers Refer to the U S Equity Options Connectivity Manual for a current list of extranet providers gt VPN Users may connect via a Virtual Private Network VPN over the Internet utilizing the IP Security Protocol IPSec VPN connectivity is also available for certification testing PITCH FAST PITCH and TOP market data are NOT available via VPN DROP executions are also NOT available via VPN gt Point to Point Users may connect using a point to point connection using leased lines or other network methods e g MetroE T 3 For more detailed information and instructions on how to connect to the BATS please refer to the U S Equity Options Connectivity Manual BATS Exchange Inc 02010 Page 7 BATS US Equities User Manual Version 1 0 0 For information regarding Bandwidth Requirements for BATS please refer to Chapter 3 of the U S Equity Options Connectivity Manual 8 Trading Hours Pre Opening Session 8 00 am to 9 30 am Eastern Time Core Trading Session 9 30 am to 4 00 pm Eastern Time After Hours Trading Session 4 00 pm to 5 00 pm Eastern Time 9 Holiday Schedule BATS will be closed in observance of the following holidays Vv New Year s Day Martin Luther King Jr Day President s Day Good Friday Memorial Day Independence Day Labor Day Thanksgiving Day Christmas VVVVV VV V The BATS Holiday Sche
9. or cancel DAY available for trading during pre opening and regular trading hours GTD expires at the earlier of specified expire time or end of the after hours trading session GTX expires at the end of the after hours trading session All remaining orders including GTC Orders expire at the end of regular trading hours 6 4 Routing Users have the option but are not required to use BATS s affiliated broker dealer BATS Trading Inc to route orders to markets other than BZX or BYX Neither BATS Only nor BATS Post Only Orders are routed to other markets BATS Only orders are only executable on the applicable BATS market BZX or BYX BATS Post Only Orders add liquidity and never remove liquidity from the order book 6 5 Crossing the Market Orders that would cross the consolidated market are slid or rejected depending upon the request of the User 6 6 Price Sliding Regulation NMS requires exchanges and other market centers to have rules reasonably designed to avoid a pattern or practice of displaying a quote which would lock or cross the consolidated quote BATS Exchange Inc 02010 Page 5 BATS US Equities User Manual Version 1 0 0 BATS price sliding allows Users to enter orders on the BATS book which would lock or cross the NBBO as long as the order would not lock the other orders on the limit order book displayed or non displayed Without price sliding algorithmic traders would likely need to retry orders m
10. rice Sliding is the default setting for BATS FIX ports Upon request from a User the permanent working price and initial display price can be reflected back in the FIX acknowledgement sent to Users in FIX tags 9690 Working Price and 9691 Display Price Example of Displayed Price Sliding NBBO 10 00X10 01 BATS 10 00X10 02 1 Buy BATS Only Order at 10 03 2 Order is re priced and ranked 10 01 and displayed down to 10 00 10 01 would lock the NBBO 3 NBBO goes to 10 00X10 02 Order is re displayed at 10 01 using its existing priority 5 NBBO goes to 10 01X10 03 gt A BATS Exchange Inc 2010 Page 6 BATS US Equities User Manual Version 1 0 0 6 Order remains unchanged it s only allowed to unslide once after entry Note Order will always execute at 10 01 regardless of its display price at the time 6 7 Pegged Orders BATS allows orders to peg to the NBBO in four ways Primary pegs to the same side of the NBBO as the order Market pegs to the opposite side of the NBBO from the order Mid Point pegs to the midpoint of the NBBO Alternate Mid Point pegs to the less aggressive of the midpoint of the NBBO or 1 tick inside the same side of the NBBO as the order PON All pegged orders are non displayed Primary and Market pegs may include a non aggressive offset Mid Point pegs may not include an offset and may result in executions at half penny increments Peg prices will be temporarily clipped as ne
11. ultiple times in rapid succession in order to attempt to get on the book when the consolidated NBBO moves putting needless load on the system BATS price sliding Displayed Price Sliding allows the more aggressive orders to reside in the matching engine even when their display price must be constrained by the NBBO Displayed Price Sliding is most likely to occur with non routable and BATS Post Only Orders By default orders route to away market centers when the away market center displays a better quote in the consolidated NBBO than is available on the order book Users may disable Displayed Price Sliding by setting FIX tag 9479 R Display Indicator on their orders or changing their default port setting by calling the BATS Trade Desk Displayed Price Sliding will permanently re price orders that cross the NBBO on entry to work at the locking price The display price of the order is temporarily slid to a less aggressive level in order to avoid putting out a quote which would lock the consolidated NBBO Regular incoming orders receive price improvement relative to the NBBO when they match against the slid order at a price more aggressive than its display price When the consolidated NBBO widens the display price is automatically unslid to re display the order at the previous locking price The new unslid price is reflected both in our PITCH feed and in our quote in the consolidated NBBO Displayed P
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