U.S. exchange operator BATS Global Markets (BATS) is officially seeking regulatory approval for a proposal that would see it drop trading in lightly traded stocks that are listed on other exchanges.
BATS, which signalled its intention to make this proposal in a letter to the industry last month, filed its proposal with the U.S. Securities and Exchange Commission (SEC) Tuesday. Under the proposal, its exchanges would no longer offer trading in thinly traded stocks that maintain a primary listing on other U.S. stock exchanges.
The move aims to repair some of the market fragmentation in this stocks with modest trading volumes. The company says that it believes that concentrating liquidity in thinly-traded stocks at a single venue “will enable market participants to more efficiently form prices, and that one venue also will be better able to innovate their markets specifically for thinly-traded stocks.”
The firm says that its proposed program would apply to issues with average daily trading volume (ADV) of less than 2,500 shares, which would affect about 700 securities; and, it would remain in effect for a given security until its ADV exceeds 5,000 shares over a rolling 90-day period.
“We view this proposal as a non-disruptive modification to U.S. equity market structure that BATS, other exchanges and the industry at large can implement with very little technical impact to the industry and its many participants,” said BATS CEO, Chris Concannon.