BATS Fishing: Value Added From The Latest Publicly-Traded Exchange

Tyler Durden's picture

Last week we learned that the BATS, the third- largest U.S. stock exchange operator, filed for an initial public offering as it seeks cash to compete amid the busiest period for industry takeovers. In other words, in the great scramble for consolidation in a market place fragmented beyond repair, BATS suddenly realized it is woefully behind, and needs cash to compete with such HY-funded LBOs as the now off-the-table Nasdaq acquisition of NYSE. Which in turn makes BATS itself a possible acquisition target. As such, once again courtesy of Nanex, we decided to take a quick look at typical value added provided by the exchange and its constituent robots. As the trading chart of TJX companies below shows, it is none other than some BATSy algo that enjoys testing the stupidity of other robots by sending out a bid about 10% from the NBBO. What is impressive is that at least one other algo really was stupid enough to fall for this bottom fishing strategy, and as the white dot indicates, hit the bid at $50.22. And that is true price discovery. Ironically, perhaps we need many more such BATS algos to push prices to real fair market value.

Naturally, this trade was promptly terminated 40 minutes later, after the trade was cancelled. But luckily, we have such bottom fishing algos running around adding exchange "value."

From Time and Sales we see the quotes from BATY fluttering (shaded):

From Time and Sales we see the single trade (shaded):

Approx 40 minutes later the trade was cancelled:

;tc|NxTime|Symbol|Listed Exg|CorrectionType|OrgSeq|OrgCond|OrgPrice|OrgSize|
12:48:16|eTJX|NYSE|Cancel;Busted;|529223|95|50.22000|100|