| NEW YORK, June 13
NEW YORK, June 13 Nasdaq Inc has urged
regulators to reject a proposal by rival exchange operator Bats
to compete for stock orders at the market close, saying it would
undermine Nasdaq's closing process and harm publicly-listed
companies and their shareholders.
Bats said in May it planned to offer brokers a type of order
that would give them the same closing prices derived from the
closing auctions on Nasdaq and the New York Stock Exchange for
stocks listed on those exchanges, but with lower execution fees.
The move by Bats, which only lists ETFs and the stock of its
parent company, CBOE Holdings, would fragment the
market close and result in less accurate pricing, Nasdaq said in
a letter to the U.S. Securities and Exchange Commission dated
If Bats were allowed to compete for market close orders it
would give it a bigger shares of the trillions of dollars in
trades when fund managers execute most of their orders at the
end of the session, pricing assets off closing prices on
exchanges where they are listed.
"With its proposal, Bats is not only failing in its
responsibility to contribute to market transparency and price
discovery, it is also impeding the ability of other national
securities exchanges to do so," Nasdaq's General Counsel, Edward
Knight, said in the letter.
Bats said its decision to offer "market-on-close" (MOC)
orders was a result of its customers complaining that fees on
listings exchanges are too high.
Trading firms Virtu Financial and PDQ Enterprises,
as well as agency broker Clearpool, threw their support behind
Bats in separate letters to the SEC.
"We believe that the Bats Market Close will introduce much
needed competition to the markets," Clearpool said. The "time is
ripe for exchanges to price their offerings more competitively
and equitably," it added.
If approved by the SEC, Bats would let market participants
send in MOC orders to be pre-matched with other such orders 25
minutes before the 4 p.m. market close. The trades would be
executed when the primary exchanges' closing prices were
published. Orders that are not pre-matched could be sent to the
primary exchanges' closing auctions.
Knight said Bats was attempting to "free-ride" on the
efforts and investments the listings exchanges have made toward
their closing processes and that the proposal would undermine
price discovery by diverting orders to Bats.
NYSE has also blasted the Bats proposal, saying that
diverting trades away from closing auctions would add to
volatility and distort prices.
(Reporting by John McCrank; Editing by Andrew Hay)