Monday, October 22, 2012

Bats to target index providers amid benchmark debate

Bats Chi-X Europe is in discussions with independent index providers to include the platform’s trading data within their calculations. The development would see volumes on alternative trading venues reflected in some of the industry’s main benchmarks for the first time.

Many of the major equities indices, including the FTSE 100, are owned by exchanges and only incorporate trading data from their owners or other bourses. This means that as much as half of intraday trading in some markets is not reflected in the major national benchmark.

The merger of Bats with Chi-X Europe in November last year created Europe’s largest European platform with 25% of daily market share.

Mark Hemsley, chief executive of Bats Chi-X Europe, said: “Independent index providers are exploring whether they should take the data to ensure that their intraday calculations are complete, or miss out on a significant proportion of the market with respect to trading in pan-European indices.”

The talks, which would result in Bats licensing its data to the index firms as part of a broader strategy to build a market data business, could eventually see independent providers of indices, such as MSCI, S&P, Markit and Russell, develop rivals to the established exchange-owned benchmarks.


Alternative trading venues have long complained that the major exchange-owned benchmarks ought to include their data. Hemsley said the Libor scandal, which led to a series of regulatory reviews over how benchmarks are composed and calculated, had thrown the issue into the spotlight. He said: “The move among independent providers to include our data therefore raises questions regarding what the exchange-owned index providers are going to do.”