Debacle of the BATS IPO

1. Nidhish Shah

2. Story sub-divisions:
Introduction
2. IPO details
3. Reasons for the dismay
4. Further problems
5. Ramifications
1.

3. What is
BATS
1.
2.
3.
4.
BATS: Better
Alternative Trading
Systems
Operates 2
exchanges in US
markets, namely
BZX exchange and
BYX exchange
Accounts for 12-13%
of all US equity
trading on daily basis
Founded as
Electronic
Communication
Network in June
2005

4. Initial Public Offering
1.
2.
3.
4.
5.
6.
March 23, 2012 – first listing on BATS
Backed off the very day – cites loss of investor
confidence
Glitch in their system
BATS stock price fell from $15.25 to $0.0002
Within 900 milliseconds from opening, stock
price had fallen to $0.2848 and within 1.5
seconds, it finished at $0.0002.
567 trades were executed till the trading was
halted.

5. Software Problems
 software bug in the codes that handle
auction of stocks
software engines that match customer
orders went into “failure status”
 Markets experienced “temporary
lockdown” – stale quotes, i.e. bid = ask


6. Software Problems
3 trades on APPL led to a circuit
breaker
2. Trading was halted and resumed with
the trades on APPL being canceled.
3. The APPL price fell by 9% due to the
glitch
1.

7. Further Problems
August 6, 2013
2. One hour shutdown of BZX
3. Internal network problem – not related
to software
1.
4.
5.
6.
September 26, 2013
3 hour shutdown of BYX due to
computer malfunction
Resumed using Chicago backup site

8. Ramification
s
1.
2.
3.
4.
Change in Chairman:
Paul Atkin
CEO and President:
Joe Ratterman
Have decided to
remain private
Merging with another
stock exchange:
Direct Edge. Touted
to be the 2nd largest
in USA

9. Methods to minimize software
issues
Circuit-breaker
 limit up / limit down – maximum incline /
decline permitted on individual stocks
before trading is halted.
 Return to the Pits


10. References
Bloomberg
 BATS website
 Bloomberg Businessweek
 Financial News
 Financial Times
 Wall Street Journal
 Forbes
 CFA Institute blogs
