Closed outcry

THE controversies that beset America’s financial markets extend to even the most basic activities, such as trading a security. What was once the preserve of a stockmarket duopoly of the New York Stock Exchange and NASDAQ, and a handful of narrow commodity markets, is now a bewilderingly complex tapestry. It is also subject to incessant reweaving: take this week’s announcement that Bats Global Markets, an operator of four stock exchanges, will be sold to the CBOE, an options exchange, for $3.2 billion.

Bats was founded in 2005 in Kansas by a man whose background was in trading shares from his bedroom. In 2012 it famously botched its first attempt to list its own shares, completing the job only this year. The price it now commands reflects its success in expanding to become America’s second-largest equity market, with a growing presence in options. It brings to the relatively long-established CBOE, founded in 1973, what is seen to be better, low-cost technology. The CBOE said that Bats will also play a role in developing new “tradable products and services”.

This is a crowded field. More than a dozen exchanges deal...Continue reading