JLN Options: BATS IPO Halted After Erroneous Trades Hit Apple, Others

Mar 23, 2012

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BATS IPO Halted After Erroneous Trades Hit Apple, Others
BATS Global Markets Inc.’s BATS -99.75% IPO was halted after erroneous trades on Nasdaq, and technical snafus on its own exchange affecting the stock of Apple Inc. AAPL -0.34% and others. BATS, which priced Thursday night and debuted this morning, was halted by Nasdaq for “clearly erroneous” trades after it opened. BATS Global Markets said it wanted to try its IPO again in the afternoon, but has canceled the plan. The exchange operator’s website now says it will be “further delaying the quoting and auction period for symbol BATS. We will advise on further updates.”
BATS also had trouble with glitches of shares on its exchange. Prominently, shares of Apple were halted for five minutes after erroneous trades were made on BATS’s exchange.

KANSAS CITY, Mo. – March 23, 2012 – BATS Global Markets, Inc. (“BATS”) today announced it has withdrawn its planned initial public offering (IPO), which was scheduled to close on March 28, 2012.
“Although our affected market has reopened, in the wake of today’s technical issues, which affected the trading of certain stocks, including that of BATS, we believe withdrawing the IPO is the appropriate action to take for our Company and our shareholders,” said Joe Ratterman, chairman, president and CEO of BATS Global Markets.

This morning at 10:45 a.m. ET, BATS BZX Exchange experienced a systems issue affecting trades in securities in symbol range A through BF.
As a result of this systems issue, three erroneous trades occurred on the BATS BYX Exchange in Apple Inc. (APPL), one of which caused a volatility halt in that stock. The erroneous trades were broken under BATS’ clearly erroneous trade policy.
The systems issue was rectified at 12:50 p.m. ET at which time trading in the securities in symbol range A through BF resumed. 

Bats Global IPO Turns Ugly After Apple Halt, Quote Error
By Nick Baker and Nikolaj Gammeltoft, Bloomberg
You think you had a bad day?
Bats Global Markets Inc. (BATS), the six-year-old equity exchange, saw its debut as a public company go haywire as a system error caused incorrect price quotes and Apple Inc. (AAPL) was halted due to a transaction on its platform.
“It’s a pretty inauspicious start,” Sam Ginzburg, a partner and head of capital markets at First New York Securities LLC, a New York-based proprietary trading firm, said today in a phone interview. Data received by Bloomberg showed Bats’s shares, the first ever to be listed on its Lenexa, Kansas-based market, traded for pennies following the initial public offering at $16. Nasdaq OMX Group Inc. later said they were canceled and Bats suspended its own stock until further notice. At the same time, a single trade of 100 shares of Apple, the world’s most valuable company, triggered a circuit breaker that paused the stock. The malfunctions may refocus scrutiny on modern American market structure, where two decades of government regulation have broken the grip of the biggest exchanges and left trading fragmented over as many as 50 venues.

BATS IPO Prices at Low End of Expected Range
By Justin Grant, Advanced Trading
The initial public offering is the first by an exchange since the Chicago Board Options Exchange went public in 2010.
Exchange operator BATS Global Markets debuted on the public market at $16 a share, the low end of the range the company predicted in its most recent prospectus. The company previously said it expected its IPO to price between $16 and $18 a share. Shares of its Class A common stock will trade under the symbol BATS on the BATS Exchange. The firm added that one of its stockholders granted the underwriters on the deal a 30-day option to buy up to an additional 944,524 shares.
BATS said its stock floatation makes nearly 6.3 million

BATS Suffers Flash Crash of its Own Shares on First Day
Tom Steinert-Threlkeld
BATS Global Markets, which pitched itself to investors as “a technology company at our core,” suffered its own Flash Crash in the very first morning its shares traded among public shareholders. And it took down shares in the world’s most valuable company, Apple, as well.

Exchange operator BATS stumbles in IPO debut
By Chuck Mikolajczak and Olivia Oran, Reuters
The debut of BATS Global Markets Exchange Inc (BATS.Z) on Friday was overshadowed by a series of blunders, including its own shares erroneously trading for less than a penny and confusing investors. The exchange operator, which priced 6.3 million shares at $16 per share late Thursday, saw its stock initially dip to $15.25 before the slew of bad trades. Shares were still halted as of 1:10 p.m. BATS had said on its website that trading would resume at 1:20 p.m. EDT, but later said on the website that there was another delay. It set no time for a resumption.
“The last thing you want to do as a listing exchange is mess up your introduction to the public investment world – the IPO,” said Jason Weisberg, managing director at Seaport Securities Corp.
The trades took place between 11:14 a.m. and 11:15 a.m. They were later canceled by Nasdaq, where the shares remained halted at $15.25.

SEC Probes Rapid Trading
Federal securities regulators are examining whether some sophisticated, rapid-fire trading firms have used their close links to computerized stock exchanges to gain an unfair advantage over other investors, people familiar with the matter say. The wide-ranging probe, being handled by the enforcement staff of the Securities and Exchange Commission, is focusing on the computer-driven trading platforms of exchanges, including BATS Global Markets Inc., the people said.

Credit Suisse Ends Curb on VIX Note After Whipsawing Owners Nikolaj Gammeltoft, Bloomberg News
March 23 (Bloomberg) — Credit Suisse Group AG, under pressure to restore order in an exchange-traded note tracking U.S. equity volatility, said it will start resupplying the market with shares today after cutting issuance off in February.
Stock will be added to the VelocityShares Daily 2x VIX Short-Term ETN, or TVIX. The security, designed to track Chicago Board Options Exchange Volatility Index futures, has whipsawed investors for the past month, climbing 89 percent above its asset value and plunging 29 percent yesterday before Credit Suisse’s announcement. It fell another 19 percent to $8.23 at 9:56 a.m. New York time today, extending its retreat since Oct. 3 to 92 percent. http://jlne.ws/GKcaWx

Volatility Flares Even Before ‘Bondmageddon’: Chart of the Day
By Liz Capo McCormick, Bloomberg March 22
Options traders are signaling that this month’s increase in the pace of swings in U.S. government debt yields is likely to continue even as their advance slows.
The top panel of the CHART OF THE DAY shows that the Bank of America Merrill Lynch MOVE Index, which measur
es implied volatility based on options for Treasuries due in two to 30 years, rose to a 2012 high this week. It climbed as Treasury 10- year yields, shown in the bottom panel, broke on March 14 above a range of 1.79 percent to 2.16 percent that had held since Nov. 1 and touched 2.29 percent, then the highest in more than four months. Option-implied volatility signals traders’ expectations for fluctuations.


Energy Brokers Get Shelter From EU’s Shift to Exchanges
By Rachel Morison and Mathew Carr, Bloomberg
Commodity brokers, facing a loss of business from a shift of derivatives trading onto exchanges, are seeking a reprieve under European proposals letting them maintain control of less transparent niche markets.
Energy derivatives that don’t trade continuously, such as swaps and options in Dated Brent crude and carbon permits, should be treated differently than other asset classes such as equities, Alex McDonald, chief executive of the London Energy Brokers’ Association, said in an interview last month. Rules being considered by European lawmakers will help determine which contracts are traded through Organized Trading Facilities, or OTFs, where brokers wouldn’t need to disclose bids and offers.

CBOE, C2, CFE, and CBSX Trading Schedule for Good Friday
CHICAGO, March 23, 2011 – CBOE Holdings, Inc. (NASDAQ: CBOE) today announced the trading schedule for Chicago Board Options Exchange (CBOE), C2 Options Exchange (C2), CBOE Futures Exchange (CFE), and CBOE Stock Exchange (CBSX) in observance of the Good Friday holiday.


TVIX: Don’t Trade Broken Products
By Brendan Conway, Barrons.com
If you’re sifting through the mess that is the leveraged ETN known as TVIX, there are three key takeaways we’ll elaborate here. If you’re new to this subject and want to read up, start here. Then proceed to Bill Luby’s Vix and More, which has been far and away the best public resource for investors curious on this issue.
(1) ETFs and ETNs that trade at a premium are an investing danger — view them as “broken” products until they’re clearly fixed. The VelocityShares Daily 2x VIX Short-Term ETN (TVIX), as the product is known, traded at a premium until yesterday because Credit Suisse (CS) suspended new creation units last month. They said they did it because the burgeoning size of the product bumped up against the firm’s internal limits of how big it should be. That cutoff created what amounted to an artificial market. It caused an imbalance between high demand and limited supply — hence, the premium. Yesterday, the price cratered. Credit Suisse announced around 7:30 Thursday evening that new creation units would get underway starting on Friday.

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