Can someone explain to me what the BATS exchange is? How does it work, I believe 25 percent of stock is traded on the exchange but how is that possible of most stocks are traded on the nyse, amex and nasdaq?
More like 12%, as you can see here http://www.batstrading.com/market_summary I trade a lot on BATS, they are fast and saves a little bit of money!
Better Alternative Trading System, is an electronic exchange based in Kansas. They did about 17 percent of the total NYSE and Nasdaq composite volume yesterday, and 1 percent of the options volume,
How do you trade on it, what brokers use it? Besides saving a little money what are the advantages? Speed? It sounds like its mostly for the big players.
A broker that allows provides direct market access would probably have the connectivity. The closest to retail that I know of is interactive brokers. But the differentiating aspects of Bats are its rebate structure (24 mils for adding, 25 mills for removing). Has some good routing options like checking for liquidity from dark pools while removing liquidity. Also have quite a bit of liquidity with their midpoint orders since they allow you to set the option to only add liquidity and pay 20 mils when adding. They are fast but unless your co-located it probably doesn't matter.
the Key with BATS is that it is the cheapest to route out. You either pay 20 or 28 mils to route out. I find that on average I pay about 26 mils to route out. Bottom line is you should NEVER try to hit ARCA, EDGX, or Nasdaq. They charge you 30 mils. Why not route to BATS have it route out to those exchanges and pay only 26 mils
Basically, the last three you mentioned are not the only game in town. There are other electronic networks you can trade on. If you use a direct access broker you can choose where to trade. You can pick by which one has the best price, or you pick based on rebates. If you are doing tens of thousands of shares per day, or more, you may want to use different "ecns" as some offer rebates to attract your flow. If you go and youtube "level 2 trading" or something like that. Find a video that explains the level two screen. You will see how it all flows. I'm not a rebate trader but when I get the entry I want I will use a limit order and get a rebate, and when I take half off. Most days I'm around flat in ecn fees. When I want in or out, I don't mess around too much. Barring a disaster I'll usually go limit order but it'll be marketable, so no rebate. Anyway Bats is one of many, but they offer a good rebate and they are usually very close to the market. Also what whiteout says about routeout. So they get a lot of action, which is why you heard of them. Best bet is look for videos on level 2.
If one uses BATS as opposed to say routing to the NYSE, is it possible that there will be different liquidity levels on the BATS then on the NYSE, like will the Level 2 show different limit orders at different prices then say the NYSE level 2. If that's the case, how does one find the most liquid ECN for each stock?