It is now quite clear why BATS CEO Bill O’Brien was so agitated during the Tuesday’s screamfest on CNBC. As The Wall Street Journal’s Scott Patterson reports, under pressure from the NYAG, BATS has hurriedly issued a statement correcting the CEO’s false comments during the exchange with IEX’s Brad Katsuyama. After Katsuyama said “you wanna do this, let’s do this” clearly giving him an out, O’Brien stated that BATS priced its trades off ‘high-speed’ data feeds when in fact they price their trades off a much slower feed (and therefore ‘enable’ the exact HFT-front-running that is in question).
Here is the clip in particular where O’Brien lies following Katsuyama’s question… that BATS uses the high-speed feed to price its trades…
The exchange in question…
“What do you use to price trades in your matching engine on Direct Edge?” Mr. Katsuyama asked Mr. O’Brien.
“We use the direct feeds,” Mr. O’Brien said.
Mr. Katsuyama, whose IEX dark pool markets itself as a haven for investors against high-speed traders, later brought up the issue again. “You use the SIP to price trades on Direct Edge,” he said.
“That is not true,” Mr. O’Brien said.
But as The Wall Street Journal reports, it was true
BATS Global Markets Inc., under pressure from the New York Attorney General’s office, corrected statements made by a senior executive during a televised interview this week about how its exchanges work.
BATS President William O’Brien, during a CNBC interview Tuesday, said BATS’s Direct Edge exchanges use high-speed data feeds to price stock trades. Thursday, the exchange operator said two of its exchanges, EDGA and EGX, use a slower feed, known as the Securities Information Processor, to price trades.
The distinction matters because high-speed traders can use powerful computers and superfast links between markets to outpace traders and trading venues that rely on slower market data, such as the SIP.
Full BATS Statement below:
Clarification Regarding Market Data Usage
April 03, 2014
BATS Global Markets wishes to clarify the market data usage of its exchanges. With respect to routing, EDGA & EDGX use direct depth-of-book data feeds for all major exchanges, and data from the relevant securities information processor (SIP) for certain smaller exchanges. With respect to the matching engine, EDGA & EDGX currently use the SIP, but will be transitioning to direct feeds from all major exchanges in January 2015. BATS BZX and BYX exchanges currently use direct feeds for both routing and its matching engine from all major exchanges, and SIP data from certain smaller exchanges.
Apparently the NYAG decided to make a public spectacle and to force O’Brien to shame himself (in a very low frequency fashion) publicly on Twitter:
For the matching engine, EDGA & EDGX currently use the SIP, and will transition to direct feeds for all major exchanges in January 2015.
— William O’Brien (@obrienedge) April 3, 2014
This leaves us with two possibilities, either:
1) The CEO of BATS has no idea what his firm actually does and is merely happy to earn an impressive amount of money skimming off the rest of the population of market traders no questions asked, or
2) The CEO of BATS is a liar and is merely happy to earn an impressive amount of money skimming off
the rest of the population of market traders no questions asked.
via Zero Hedge http://ift.tt/1q0MqbN Tyler Durden