BATS Preps Feeds for New EDGX Options Market

The new exchange is based on a customer priority/pro rata allocation model, which means that client orders will be filled first at the best price, then non-customer orders will be allocated based on size. The launch of the new EDGX Options market will complement BATS' existing BZX Options price-time priority market, which operates a maker-taker pricing model based on best price, enabling the exchange to compete for a new segment of order flow that trades outside the price-time markets that BZX Options operates, officials say.

The EDGX Options matching engine and data distribution platform will be located with the other BATS US markets at Equinix's NY5 data center in Secaucus, NJ, and will leverage the same technology, including customer connectivity, messaging protocols, quotation and execution engine, order router, datafeeds and infrastructure, to minimize the technology efforts required for members to begin trading.

BATS will offer a Multicast PITCH feed for EDGX Options, which will provide real-time depth of book quote and trade data. Like its BZX Options market, there will be WAN and Gigabit Ethernet connectivity options to access the feed in the NY5 datacenter.

The exchange decided to provide the EDGX Options market data feeds using the same market data protocols as the BZX Options feed, to help customers keep development costs low, says Kapil Rathi, vice president of options business strategy at BATS. "If you are writing to the same APIs and market data feeds, adding a second exchange becomes easier," Rathi says.

BATS will initially offer the data free of charge to attract liquidity to the venue, though it will likely begin charging for market data once it achieves substantial market share. "We are a firm believer in keeping the fixed costs low," Rathi says. "We only just began charging for data from our BZX options market, which now has a market share of 9.4 percent. We try not to add additional costs or more complicated technology; we are first focusing on building the business."

Market data from EDGX Options will also be available on the Options Price Reporting Authority's consolidated feed of US options quote and trade data. Replay test data has been available since June 1 from the Securities Industry Automation Corp (SIAC), which manages the SIP that collects data from US options exchanges, calculates a best bid and offer, and distributes OPRA's consolidated feed, for market data vendors to test distribution and connectivity.

BATS will also offer testing for members starting Sept. 14, 2015, and weekend testing opportunities in the EDGX Options Production environment using active production symbols on Oct. 3 and Oct. 31, 2015.