BATS to file for second U.S. options exchange

By Saqib Iqbal Ahmed

NEW YORK, April 16 (Reuters) - Exchange operator BATS Global Markets said on Thursday it plans to open a second options bourse in November as it tries to capture a larger share of the U.S. options market.

BATS Global Markets said it will file an application on Thursday with the U.S. Securities and Exchange Commission to launch a new exchange called EDGX Options, an addition to its existing BATS Options platform.

Unlike BATS Options, which operates in a price-time priority market where quotes and orders are prioritized according to price and time, the new exchange will work on a pro-rata allocation model, where orders are prioritized according to price.

With the new exchange, BATS Global would compete with exchanges that offer the more traditional pro-rata model, including ones run by CBOE Holdings Inc (NasdaqGS: CBOE - news) and International Securities Exchange Holdings.

BATS Options handled about 9.4 percent of equity and index options contracts in March, up from 4.1 percent a year ago. For March, the exchange had the fourth biggest market share among the twelve U.S. options exchanges, according to data from OCC, formerly the Options Clearing Corp.

There are currently a dozen active U.S. options exchanges. International Securities Exchange Holdings, the New York-based unit of Deutsche Boerse AG (Xetra: 581005 - news) in September filed for another exchange, ISE Mercury, which is yet to open.

Some traders have complained there is little to differentiate the various options exchanges, adding that the large number of exchanges just adds to the complexity of the market. (Reporting by Saqib Iqbal Ahmed; Editing by Jeffrey Benkoe)