Hotspot Introduces Market-Leading Standards for Liquidity Providers
28 May 2015 - 7:30PM
Business Wire
New Standards for Market Makers Designed to
Provide Enhanced Transparency to the Global Electronic FX
Market
Hotspot, a leading institutional foreign exchange (FX) market
owned and operated by BATS Global Markets (BATS), today announced
new standards for Hotspot liquidity providers that qualify as
Market Makers, including reduced timeframes for acting on Non-Firm
Liquidity and high targeted acceptance rates for such orders.
The Hotspot market provides participants with access to a unique
combination of “Firm Liquidity” and “Non-Firm Liquidity.” Firm
Liquidity and orders can be provided by all Hotspot market
participants, including approved Market Makers, while Non-Firm
Liquidity can only be provided by approved Market Makers.1 The
Hotspot market prioritizes Firm Liquidity – in price-time priority
order – over Non-Firm Liquidity. Hotspot also offers participants a
choice with regard to accessing Non-Firm Liquidity, including a
choice of Market Makers with whom to interact. All Market Makers
must be approved to provide Non-Firm Liquidity and must continue to
satisfy certain Hotspot Market Maker requirements.
Hotspot is also introducing more transparency around the
benefits of Non-Firm Liquidity while increasing the standards for
Market Makers. While Hotspot participants are free to choose the
types of liquidity that they would like to access, the addition of
Non-Firm Liquidity typically yields tighter prices. For example,
bid-offer spreads on Non-Firm Liquidity can be up to 80% tighter
than spreads from Firm Liquidity alone.2
The new Hotspot Market Maker standards, which will be effective
July 5, 2015, include the following:
- Tighter Timeframes for Action:
Hotspot is reducing the timeframe under which Market Makers are
required to act on their Non-Firm Liquidity to 100 milliseconds
from 200 milliseconds.
- 85% Targeted Acceptance Rates:
Market Makers are expected to have an acceptance rate of at least
85% of the orders interacting with their Non-Firm Liquidity, to
ensure the Hotspot market continues to provide exceptional fill
rates and market quality.
- $1 Million Minimum Quote Sizes:
Market Makers must quote a minimum size of 1 million base currency
units.
- Market Maker Eligibility: In
order to be eligible to provide Non-Firm Liquidity, a Market Maker
must trade an average daily notional volume (ADV) of $250 million
or more aggregated across all market making accounts.
“We are constantly striving to ensure our customers experience
the highest level of fulfillment and market quality on Hotspot. We
believe that these new Market Maker standards will further increase
fill rates and enhance market quality, creating an even more robust
experience for our customers,” said Bill Goodbody, Jr., Senior Vice
President, Foreign Exchange at BATS. “As we drive to bring more
transparency to the global foreign exchange market, we feel it is
important to introduce new standards to further strengthen the
requirements around our liquidity.”
Hotspot utilizes world-class market surveillance and
supervision, including propriety tools, to oversee its market to
ensure that the highest standards are upheld by all Hotspot
participants. In addition, Hotspot’s Liquidity Management team
works closely with participants to ensure an optimal trading
experience.
Hotspot’s average daily volume in April 2015 was $28.4 billion,
up from $25.2 billion in April 2014. Its diverse customer base of
more than 220 clients includes banks, market makers, hedge funds
and institutions.
BATS acquired Hotspot in March 2015. In addition to Hotspot,
BATS Global Markets operates Europe’s largest stock exchange, the
continent’s #1 trade reporting facility for equities, the
second-largest U.S. stock market, and the fastest-growing U.S.
options market. In April 2015, more than 40% of all equity trades
executed in Europe touched the BATS exchange or trade reporting
systems. BATS executed notional volume of $126.1 billion per day
across all of its platforms for the month.3
About BATS Global Markets,
Inc.
BATS Global Markets, Inc., a leading global operator of
exchanges and services for financial markets, is committed to
Making Markets Better for traders, investors and issuers. In
Europe, BATS operates the largest pan-European equities exchange,
offering trading and listing services across 15 major European
markets, as well as BXTR, the continent’s largest trade reporting
facility. In the U.S., BATS operates four stock exchanges – BZX,
BYX, EDGX and EDGA – and regularly ranks as the top market for
exchange-traded fund (ETF) and retail-driven liquidity. The company
is a listing venue for ETFs and other structured products and also
operates a U.S. equity options market, BATS BZX Options, and is
launching BATS EDGX Options later in 2015. Globally, BATS
serves the foreign exchange (FX) market, the world’s largest asset
class, with Hotspot, a leading institutional spot foreign exchange
market. With its world-class technology and relentless customer
focus, BATS strives to bring efficiency, transparency and fairness
to market participants. The company is headquartered in Kansas
City with offices in New York, London, Chicago and Singapore.
Further information on BATS can be found at www.bats.com and by
following us on Twitter @BATSGlobal.
1 Firm Liquidity consists of orders and quotes posted to the
Hotspot Platform that are immediately executable against incoming
orders without any further action. Non-Firm Liquidity consists of
orders and quotes posted to the Hotspot Platform that require the
Market Maker posting such order or quote to either accept or
decline an incoming order (within certain parameters determined by
Hotspot) prior to an execution against such Market Maker’s order or
quote.
2 Source: Hotspot Market data.
3 Source: BATS Global Markets data.
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BATS Global MarketsMedia:Randy Williams (NYC)
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