Bats Chi-X Europe, the largest pan-European trading platform, is looking to shake up the region's exchange-traded fund market with a new model for secondary trading.
Mark Hemsley, chief executive of Bats Chi-X Europe, said the platform – which has helped to revolutionise European equities trading and clearing since its launch in 2008 – is exploring ways of cleaning up what he described as the “mess” in the ETF secondary market. He said: “We are looking at doing a lot more in the ETF space. The major problem with ETFs at the moment is that the products are tied to a geographical market, so lookalike products are replicated across different exchanges, which has created a lot of fragmentation, and as a result there are a lot of ETF products with very little liquidity.“
Hemsley said Bats Chi-X Europe is exploring ways of channelling liquidity into a handful of specific ETF products, using trade order routing techniques that have become well established in the underlying cash equities market. Trade order routers search for liquidity and send orders to venues according to pre-programmed parameters.
Bats Chi-X Europe is the first alternative trading venue to become a fully-fledged stock exchange and today begins trading under the recognised investment exchange licence, which allows exchanges to list companies and derivatives products. The company’s US parent, Bats Global, already lists ETF products and Bats is also considering launching primary ETF listings in Europe.
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