Bats Global MarketsEdit

Bats Global Markets (BGM) was a principal operator of electronic securities exchanges in the United States, best known for pushing fast, low-cost trading venues into a market landscape once dominated by the legacy clearing and trading floors. The firm built and managed a family of lit exchanges and routing venues that offered rapid matching, deep liquidity, and competitive pricing, appealing to both institutional and retail traders seeking efficient price discovery. After a series of mergers and a later acquisition, the BGM platforms were integrated into Cboe Global Markets, where they continue to influence the dynamics of U.S. equity trading as part of a broader, diversified exchange ecosystem. The history of BGM is a case study in how competition among exchange venues can reshape market structure, trading costs, and the speed with which information is incorporated into prices. Cboe Global Markets and Direct Edge are important parts of the story, as is the broader framework of U.S. market regulation and competition among venues. Reg NMS and best execution are frequent points of discussion for observers evaluating the role of such venues in the price discovery process.

Historically, BGM emerged as a disruptive force in electronic trading, offering a different approach to matching engines, connectivity, and liquidity provision compared with established exchanges. It built a portfolio that included multiple trading venues designed to attract diverse liquidity pools and trading strategies. In 2013, BGM and Direct Edge announced a merger that combined EDGX and EDGA (Direct Edge’s markets) with BZX and BYX (BGM’s markets), creating what at the time was among the largest all-electronic equities platforms in the United States. The merger was part of a broader trend toward consolidation among U.S. equity venues in pursuit of scale, liquidity, and technology investment. Direct Edge and BZX are central to this period of growth and competition. The combined entity continued to operate under the Bats branding for a time, before the whole business was later integrated into Cboe Global Markets.

History

Origins and growth as an electronic trading challenger

Bats Global Markets originated as a challenger to the traditional stock exchanges by offering a fast, all-electronic trading environment. The firm positioned itself as a low-cost, high-speed alternative to the incumbent venues, with a focus on delivering efficient price formation and direct access for market participants. This emphasis resonated with traders who valued speed, reliability, and the ability to access multiple routes to liquidity. The growth of BGM helped catalyze a more competitive market structure in which different venues competed on execution quality, access, and technology rather than simply on brand and legacy advantages. BZX and BYX became primary pillars of this strategy, alongside Direct Edge’s EDGX and EDGA platforms.

Merger with Direct Edge

A landmark development came with the 2013 announcement of a merger between BGM and Direct Edge. The combined entity integrated the BZX/ BYX platforms with EDGX/ EDGA, expanding liquidity and increasing the number of routes to price discovery. The deal underscored a central tenet of market economics: competition among venues can drive efficiency and lower costs for investors, at least in the presence of reasonable regulation and robust market data access. The combined network continued to operate under the Bats family of venues until the integration into Cboe Global Markets progressed further. Direct Edge played a critical role in this phase, supplying both technology and liquidity that complemented BGM’s platform.

Acquisition by Cboe Global Markets

In 2017, Cboe Global Markets completed its acquisition of BGM, acquiring the technology, talent, and venue access that had helped BGM challenge the established exchanges for years. The deal, valued at roughly $3.2 billion, brought BGM’s trading venues under the umbrella of one of the oldest and most established exchange operators in the world. The integration consolidated multiple U.S. equity venues—BZX, BYX, EDGX, and EDGA—into a single, diversified menu of products and services at Cboe. The move reflected a broader industry trend toward scale and risk management through consolidation, while preserving competition among multiple trading venues within a single corporate framework. The Bats brands were retained as part of Cboe’s global network, albeit with branding and product strategy aligned to the broader Cboe portfolio. Cboe Global Markets and EDGX / EDGA play roles in the ongoing structure and governance of these markets.

Market structure and technology

Trading venues and routes: The BGM family encompassed multiple venues designed to attract different liquidity pools. The BZX and BYX platforms served as lit exchanges with distinct fee schedules and technical specifications, while EDGX and EDGA carried forward Direct Edge’s approach to liquidity and routing. Each venue offered its own order types, matching logic, and market data feeds, all contributing to a multi-venue landscape where price discovery occurs across several platforms. BZX BYX EDGX EDGA
Technology and latency: A core selling point was the emphasis on low-latency matching engines and high-throughput connectivity. In practice, this meant rapid order processing, direct routes to liquidity, and proximity to market data infrastructure. This race to speed is a persistent feature of U.S. equity markets, influencing strategies across high-frequency trading and traditional investing alike. The emphasis on technology and latency is foundational to how these venues compete for liquidity and to how market participants decide routing and execution. High-frequency trading
Market data and access: The expansion of multiple venues increased the importance of market data access, quotes, and depth of book information. Investors and their tech teams rely on transparent, timely data to determine best execution across venues. The regulatory framework surrounding market data, including access rules and costs, remains a topic of policy debate among industry observers. Market data
Regulation and market structure: The existence of multiple venues raises questions about best execution and price discovery. Proponents argue that competition among venues reduces spreads and improves liquidity, while critics worry about complexity, fragmentation, and the potential for uneven access or suboptimal routing. The discussion often centers on how rules like Reg NMS shape routing and execution quality across a multi-venue ecosystem. Reg NMS Best execution

Controversies and debates

Fragmentation vs. competition: A central debate around BGM and its successors concerns whether a more fragmented market with multiple venues yields real benefits for investors. From a market-centric perspective, competition among venues lowers costs and improves execution quality; from a regulatory or consumer-protection viewpoint, fragmentation can complicate price discovery and raise questions about the transparency of best execution. This tension is a recurring theme in discussions about modern market structure. Best execution Dark pools
Dark liquidity and transparency: Critics argue that a portion of liquidity resides on venues that do not display full orderbooks, raising concerns about price transparency and public price discovery. Supporters contend that dark or hidden liquidity helps absorb large orders without causing market impact, ultimately benefiting investors who seek to minimize price movement from large trades. The balance between transparency and execution efficiency remains a live topic in markets that include multiple venues and routing options. Dark pools
Pay-for-order-flow and broker incentives: A frequent point of contention is whether brokers are adequately serving clients across all venues, or whether some revenue models incentivize routing orders to particular venues. Proponents of a free-market approach maintain that competition among venues fosters better pricing across routes, while critics argue that compensation structures can skew routing decisions away from best possible execution. The debate is commonly framed in terms of investor welfare, market efficiency, and the appropriate level of regulatory oversight. Payment for order flow Best execution
Consolidation vs. competition: The 2017 integration of BGM into Cboe Global Markets is often cited as a swing point between pure competition and scale-driven efficiency. Advocates of consolidation emphasize risk management, liquidity aggregation, and regulatory compliance at scale, while critics argue that fewer independent venues could reduce competitive pressure and potentially raise execution costs. The reality, though, is that a diversified operator with multiple venue brands can maintain competitive pressures across a broader platform. Cboe Global Markets
Speed, risk, and market resilience: The emphasis on speed brings questions about risk controls and systemic resilience. While faster venues can improve price discovery, they also demand robust risk management and regulatory oversight to prevent outages or misrouting that could harm market participants. The industry continues to invest in technology and governance practices designed to balance innovation with reliability. High-frequency trading Market resilience