The moment was remarkable, if not dramatic.

The first company to list shares on BATS Exchange would be BlackRock, the January 12 announcement said.

The world’s largest asset manager – with $3.5 trillion under its auspices as of December 31 -- would be listing eight exchange-traded funds on the newest listing rival to the New York Stock Exchange and the Nasdaq Stock Market.

The listings started in late January. They now number nine.

But BlackRock remains the only company of any type to list shares on the BATS Exchange.

Not even BATS itself does that.

Not without trying. On March 23, the operator of two stock exchanges and one options exchange in the United States and two electronic trading facilities in Europe attempted to sell shares to the public for the first time, on the main BATS Exchange, known as its Z exchange.

But fewer than 2 million out of a planned 6.3 million shares made their way into a print – aka, sale – at $15.25 each. That was 75 cents below the planned $16 a share offering price.

BATS, unlike “traditional market centers,’’ was using a Dutch auction process to sell its shares.

The BATS US Equities Auction Process was designed to automatically match orders in BATS-listed securities at a single price, using what is known as a Dutch process.

In a Dutch auction, trading begins with a high asking price that is lowered until one participant is willing to accept the auctioneer's price, or a predetermined minimum acceptable price.

In effect, BATS shares began trading below the intended price. And the remaining 4.3 million would go down from there.

But that remains to be seen. A “software bug,’’ by BATS term, locked up the auction. Attempts to rectify the problem took so long that BATS decided investor confidence was eroded. Apple shares even got caught in the cross-fire, triggering a five-minute break in trading of the digital devices giant.

BATS ended up pulling the initial offering of its stock on the same day it started.

That left BlackRock as the only issuer of shares that had any listings on the BATS Exchange.

BlackRock did not respond to telephone or electronically mailed requests for comment on its experience with BATS, on the Monday or the Tuesday after BATS’ meltdown.

The company would not comment on whether it was happy with its experience with its listings on the BATS Exchange.

Or whether it would list shares for its funds again, if faced with the choice on, say, March 27.

That even though the problems with the conduct of the BATS I.P.O. did not appear to extend to trading in shares already listed on the BATS Exchange.

The exchange has had “no problem at all’’ with any transactions involving shares of BlackRock exchange-traded funds, said BATS vice president of communications Randy Williams. The exchange has ‘’not had any issues’’ with trading in BlackRock shares in January, February or March, he said. BlackRock did confirm that there has been no technical interference with trading in its ETF shares.

The volume of trading has not been huge, however. A Money Management Executive review of trading in all nine BlackRock ETFs on the BATS Exchange shows that average daily volume is under 10,000 shares each.

On occasion – usually after initial listing – there can be bursts of trading in the tens of thousands of shares. In the first half of March, for instance, trading in the iShares MSCI India Index Fund went from 1,500 shares one day to 2,700 the next to 155,300 the next. And on the fourth day? Three hundred shares.

BlackRock also would not comment on whether the level of trading has met its expectations.

But Fidelity Investments, which only offers one exchange-traded fund to shareholders, notes that fund managers are in no way tied to a particular exchange in which to execute trades.

Fidelity’s National Financial Services unit, for instance, used BATS to execute roughly 11 percent of its customer orders in the fourth quarter, according to the latest disclosures to U.S. regulators and a report by Reuters. National Financial represents Fidelity and about 300 client firms with about $365 billion in assets under administration.

But a BATS implosion is of no import to Fidelity. “Fidelity has many venues available to our traders, so this will have no effect on us,’’ said spokesman Stephen Austin. “We monitor the connections to, and the performance of, all trading systems that we interact with,’’ he said, adjusting accordingly.

The iShares funds are based on MSCI indexes. The nine funds listing on BATS Exchange include:

• iShares MSCI Norway Capped Investable Market Index Fund (BATS: ENOR)

• iShares MSCI Australia Small Cap Index Fund (BATS: EWAS)

• iShares MSCI Canada Small Cap Index Fund (BATS: EWCS)

• iShares MSCI Finland Capped Investable Market Index Fund (BATS: EFNL)

• iShares MSCI Germany Small Cap Index Fund (BATS: EWGS)

• iShares MSCI India Index Fund (BATS: INDA)

• iShares MSCI India Small Cap Index Fund (BATS: SMIN)

• iShares MSCI United Kingdom Small Cap Index Fund (BATS: EWUS)

• iShares MSCI Denmark Capped Investable Market Index Fund (BATS: EDEN)

Trading in the ninth fund, the Denmark index fund, showed very light trading on March 27, with BATS reporting one trade of 1,000 shares, two at 400 shares and on of 100 shares. The value of the fund fell from $29.76 a share to $29.47 a share, that day.

As a point of competitive difference, only BATS-listed securities are eligible for BATS auctions.

Which may now be a moot question. At least for several months – or years – before another exchange-traded fund or public share issuer agrees to list on the BATS exchange. Indeed, no fund firm contacted by Money Management Executive this week was willing to comment on whether it would consider listing shares of exchange-traded funds on the BATS Exchange.

Ironically, perhaps, BlackRock offers a series of mutual funds that go by the BATS acronym.

The funds, known as BlackRock Bond Allocation Target Shares, are a series of fee-waived mutual funds that invest in fixed-income securities.

They are not listed on the BATS Exchange.

Tom Steinert-Threlkeld writes for Securities Technology Monitor.


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