NEW YORK, April 18 Equities exchange operator BATS Global Markets will start charging U.S. clients for access to its proprietary market data as of July 1, a move that will bring in new, steady revenues as a multi-year market-wide slump in trading volumes continues.
BATS, which was the No. 3 U.S. equities exchange in 2012, will introduce monthly fees for depth of book data, as well as top of book and last sales feeds for its two U.S. exchanges (BATS BZX and BATS BYX), it said in a note to clients.
BATS Chi-X Europe depth of book feeds sourced from the United States will also be subject to fees, BATS said in the note. (Link to the fee schedule:)
BATS spokesman Randy Williams declined to comment.
Since its launch as an electronic communications network (ECN) in 2005, the Lenexa, Kansas-based company has grown to capture about 12 percent to 13 percent of U.S. stock trading volume and a smaller amount of options trading. BATS gained exchange status in 2008.
Competing exchanges run by NYSE Euronext, Nasdaq OMX Group, and Direct Edge all charge fees for their data, which provides a steadier source of income than trading fees. About 15 percent of NYSE's $2.3 billion in revenues last year came from market data. About 21 percent of Nasdaq's $1.7 billion in revenues was derived from its data products.
Part of the reason BATS was able to quickly gain market share against the New York Stock Exchange and the Nasdaq was that it was giving its proprietary data away for free, said Paul Rowady, an analyst at research and advisory firm TABB Group.
"This is a significant departure from their roots and it speaks volumes about the exchange environment," he said.
Exchanges have been looking for ways to increase their revenues as trading volumes remain low, while costs related to technology and regulatory compliance have been rising, said Bill Karsh, a special adviser to National Stock Exchange, and a former head of Direct Edge.
"Everything is going higher except for volumes. It's harder and harder to keep up," he said.
BATS said in a regulatory filing last year that it was exploring the idea of charging for market data.
The filing was in anticipation of BATS's initial public offering on its own exchange. But the market debut, on March 23, 2012, was marred by a technology glitch, causing BATS to take the extremely rare step of withdrawing its IPO.
The additional revenue from its proprietary data could make BATS more appealing to investors if it tries to go public again, Karsh said.
The exchange operator plans to charge companies $1,000 a month for internal usage of depth of book data from the BZX exchange and $500 a month for depth of book data from the BYX exchange. For top of book and last sale data, the cost will be $500 a month on both BZX and BYX.
Firms that distribute the depth of book data externally will have to pay $5,000 a month for the BZX data and $2,500 for the BYX data. Distribution of the top of book and last sale data will be $2,500 a month each of the two exchanges.
BATS began charging its European clients fees for its proprietary data last year.