Bats withdraws IPO after errors pummel its stock, halt Apple

Bad debut halts promising IPO

March 23 (Bloomberg) -- Bats Global Markets Inc., the six- year-old equity exchange, canceled its initial public offering, stunning Wall Street after errors on its own computer systems derailed trading in the stock and forced a halt in Apple Inc.

“We believe withdrawing the IPO is the appropriate action to take for our company and our shareholders,” Joe Ratterman, the chief executive officer, said in a statement. Asked if that meant Bats is no longer going public, Randy Williams, a company spokesman, replied by e-mail, “Yes, that’s correct.”

Pulling the IPO capped a day of missteps for the electronic exchange, beginning just as the shares were making their debut. Data received by Bloomberg around 11 a.m. in New York showed the stock, the first ever listed on its Lenexa, Kansas-based market, quoted at pennies after being priced yesterday at $16. Around the same time, a 100-share transaction in Apple was executed on Bats so far away from the market price that it triggered a halt.

“This is a tragedy,” James Angel, a finance professor at Georgetown University’s business school in Washington, said in a phone interview. “I’m reeling from the shock. It’s like seeing an airplane crash on takeoff. To see defeat snatched from the jaws of victory is always a sad thing.”

Market Structure

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, whose name stands for Better Alternative Trading System, rose to prominence in tandem with the proliferation of electronic firms that now dominate the buying and selling of equities in the U.S.

A single trade for 100 shares executed on a Bats venue briefly sent Apple down to $542.80, according to data compiled by Bloomberg. The order was executed at 10:57 a.m. New York time. Two more transactions, which sent the stock back above $598, were made before the halt. The stock stayed around that level once trading resumed five minutes later.

Bats sent a notice about 10 minutes before the Apple trade saying it was investigating “system issues” affecting companies with ticker symbols ranging between A and BF. Apple’s is AAPL. Bats’s ticker is BATS.

Bats said in a regulatory filing that it “experienced very low downtime” last year. BZX Exchange, its main market, was accessible to users 99.94 percent of the time. BYX Exchange, its second market, was available 99.998 percent of the time, the company said. The main market processed an average of about 29,000 order messages per second last year, Bats said.

Page 1 of 2 >>

Copyright 2014 Bloomberg. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Comments
comments powered by Disqus