BATS Global Markets said the Securities and Exchange Commissions’s Division of Enforcement is looking at its methods for developing new order types as well as how it develops its information technology systems.
In its registration statement with the SEC to begin the process of selling shares to the public for the first time, the Lenexa, Kansas, trading technology developer and exchange operator said it:
“recently received a written request from the SEC’s Division of Enforcement seeking documents and information related to the development, modification and use of order types, and our communications with certain market participants (including certain of our members affiliated with certain of our stockholders and directors) regarding the development, modification and use of order types; our information technology systems; and trading strategies.”
The company gave no further details, except to note that it already acts as a self-regulatory organization under the jurisdiction of the SEC and is subject to reviews and inspections by the SEC, and, in some cases, reviews and inspections by the Financial Industry Regulatory Authority, which has authority over brokers.
The investigation is in its early stages and BATS said it is cooperating with the SEC’s staff.
The company said it did not believe the impact of any of the reviews will be material.
During 2011, BATS’ primary exchanges, known as BZX and BYX, entered into a regulatory services agreement, or RSA, with another the Chicago Board Options Exchange, to perform certain regulatory functions on their behalf, including for our U.S. listed equity options market.
Prior to the CBOE RSA, BZX and BYX maintained an RSA with FINRA.
In conjunction with the transition to the CBOE RSA, FINRA continues to provide some regulatory services to BATS under the FINRA RSA, including completing examinations and investigations that were in process when BZX and BYX executed the CBOE RSA.
Tom Steinert-Threlkeld writes for Securities Technology Monitor.