By Bradley Hope And Telis Demos
BATS Global Markets Inc., one of the country's three big
stock-exchange operators, is preparing to replace its chief
executive officer as it lays the groundwork to take another stab at
an IPO, according to people familiar with the matter.
Chris Concannon, a former executive at the high-speed trading
firm Virtu Financial LLC who joined BATS as president in December,
is expected to be appointed as CEO as early as this summer, the
people said. Longtime incumbent CEO Joseph Ratterman would become
chairman of the company's board of directors, they said.
The IPO discussions come nearly three years after BATS, based in
Lenexa, Kan., flubbed its first attempt at an IPO. In March 2012,
the company canceled its offering after a software glitch sent its
shares plunging to just a few cents in the opening moments of
trading on its own exchange. In the aftermath, Mr. Ratterman, 48
years old, was stripped of his chairman title.
In an apparent sign of the continued effects of the failed IPO,
BATS is considering listing its shares on the New York Stock
Exchange or Nasdaq rather than trying again to list on its own
exchange, the people said.
Mr. Concannon, 47, also has served as an executive of Nasdaq OMX
Group Inc. He is generally seen as a respected market-structure
expert who could pitch the company to investors, the people said.
Mr. Ratterman decided to hand over the reins of BATS to spend more
time on his charitable projects in Kansas City, the people
said.
Once BATS decides to restart the IPO process, the company could
list shares as early as the first quarter of 2016, the people said.
BATS hasn't filed documents with the Securities and Exchange
Commission that are necessary before planning an offering, the
people said.
"We are absolutely not planning an IPO," a BATS spokesman
said.
One reason BATS is now considering an IPO is the recent
share-price performance of other exchange operators, people
familiar with the company's thinking said. In the past six months,
CME Group Inc., Intercontinental Exchange Inc., and Nasdaq OMX have
rallied at least 17% each, well above the 7% rise in the S&P
500 index in that time. Shares of Nasdaq, which operates a mix of
exchanges most similar to BATS, touched a record high earlier this
month.
Among the original impetuses for an IPO was the need of the
estate of then-defunct Lehman Brothers to cash out its stake in the
exchange as it sought to repay creditors. In 2013, private-equity
firms Spectrum Equity and TA Associates bought Lehman's stake.
BATS's other owners include investment banks and other clients of
the exchange, according to its 2012 IPO prospectus.
BATS was founded in 2005 by Dave Cummings, an early pioneer in
using computers to trade stocks, to take on the then-dominant NYSE
and Nasdaq exchange operators. Mr. Cummings pulled together support
from the country's biggest broker dealers to launch BATS, which
stands for "Better Alternative Trading System."
Last year, BATS completed its acquisition of Direct Edge
Holdings LLC, another exchange operator. After the merger, BATS has
consistently ranked as the second-largest exchange operator in the
U.S. by number of shares traded.
BATS took its first step into the growing currency-trading
market in January with its acquisition of the Hotspot FX trading
venue from KCG Holdings Inc. for $365 million. The deal is expected
to close in the second quarter.
Expanding its currency-trading business is part of the company's
plans to diversify its revenue and broaden its offerings to include
other asset classes. The global foreign-exchange market sees
roughly $5.3 trillion of average daily trading.
The company also is interested in the fixed-income market, Mr.
Concannon said in an interview last year.
Also in January, BATS agreed to pay $14 million to settle
allegations from the SEC that it failed to disclose to investors
important information about how its markets worked. It was the
highest fine ever levied by a regulator against a stock
exchange.
William O'Brien, Direct Edge's former president, was forced to
resign from BATS in July in part because of his difficult
relationship with the SEC, The Wall Street Journal reported last
month.
"While I will not comment on the details regarding my departure
from BATS, any suggestion that I was unhelpful--deliberately or
otherwise--regarding an SEC investigation is completely without
merit," Mr. O'Brien said in January.
A BATS spokesman said at the time, "There's no evidence that
Bill O'Brien's relationship with the SEC had any negative impact on
the case."
Write to Bradley Hope at bradley.hope@wsj.com and Telis Demos at
telis.demos@wsj.com
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