Earlier this year, BATS Global Markets and Direct Edge merged under the BATS umbrella to create one of the largest equities market operators in the U.S., Europe and globally. In fact, in July BATS became the world’s largest stock exchange operator the first time, executing $1.27 trillion in notional value of transactions compared with $1.21 trillion for the Intercontinental Exchange, which operates NYSE Group, and $1.10 trillion for NASDAQ OMX.
Beginning early next year, Equinix’s NY5 state-of-the-art data center in Secaucus, NJ will become the new data center home for BATS Global Markets’ U.S. exchanges. All our exchanges will operate on the proven, world-class BATS technology providing a common platform that will help reduce costs and complexity for customers.
We have been working diligently on the integration of the two companies over the past six months and are on track to complete the technology migration on January 12, 2015, when we will be moving the legacy Direct Edge exchanges – EDGX and EDGA – to BATS technology in the Equinix NY5 data center. The existing BATS exchanges in Weehawken, NJ, – BZX, BYX, and BATS Options – will move to NY5 in the second quarter of 2015.
With all our U.S. exchanges residing within the NY5 data center, our customers will be able to rationalize their infrastructure and connectivity costs into the ever-growing financial eco-system on Equinix’ Secaucus campus. To ensure customers can fully utilize their existing infrastructure within Equinix’s NY4 datacenter, we have engineered equal fiber length and latency for Members within either the NY4 or NY5 data center. When connecting to a BATS market in NY5 from either data center, the fiber between each Member’s data center space to the BATS markets in NY5 will be equidistant as verified through optical testing.
With the integration of the two companies, we’ve focused on continuing to improve and grow a market model that provides choice and technology compatibility, while maintaining customer cost efficiency. A smooth integration is our top priority to ensure that everything is seamless to our customers. To this end, we’ll be offering a Direct Edge FIX compatibility mode for current Direct Edge customers to aid them in their transition to BATS technology and protocols. Current Direct Edge customers will also be able to use their existing cross-connects to the legacy exchanges to access the new exchange platforms in NY5.
It’s worth mentioning that this major decision and effort to consolidate all our U.S. exchanges in NY5 was driven directly by feedback from our customers. In service to our Members, BATS has worked with Equinix to establish preferential pricing for customers who choose to co-locate their equipment with Equinix at NY5 to connect to BATS’ exchanges. This “BATS Customer Pricing” provides customers meaningful discounts and cost certainty regarding the hosting of equipment at the data center where our exchanges operate, making it highly attractive as a principal site. We are extremely excited about this integration, our new data center home in NY5, and how it positions us for continued growth for years to come thanks to our committed customers.
Following are some of the key questions we’ve been receiving regarding our planned move to NY5 along with our answers.
What is the integration transition timeline? When will EDGA/EDGX transition to BATS technology?
We are migrating the EDGA and EDGX exchanges to BATS technology at the Equinix NY5 data center in January 2015, at which point the Direct Edge technology will be retired and there will be one common technology platform across all four exchanges. In the second quarter of 2015, we will transition the BZX, BYX, and BATS Options to Equinix NY5 so that all five order books will be in one data center.
EDGA and EDGX will remain in their current location at Equinix NY4 until the migration to BATS technology in NY5 in January 2015. BATS will also maintain a network Point-of-Presence (PoP) in Equinix’s NY4 indefinitely so that current Direct Edge Member connections in NY4 can be used to access all BATS/Direct Edge Exchanges without interruption once they are moved to NY5.
The integration is proceeding on schedule, and member connectivity is available now to the new EDGA and EDGX production environments within the Equinix NY5 data center.
Why are you planning to keep all four exchanges? Why not consolidate into larger pools of liquidity?
Each exchange has its own trading ecosystem that meets the needs of various customers. By continuing to offer four unique pools of liquidity, we continue to provide customers with choice for executing their trading strategies. You can view our platform change matrix which outlines all the key functional changes to each of the four exchanges related to the integration.
With the integration, we’re focused on building and growing a market model that provides choice and technology compatibility, while reducing customer costs. With all four exchanges eventually housed in the same data center and operating on the BATS technology with a common platform, customers will be able to materially reduce their infrastructure costs and improve their efficiency.
Will Members have the ability to access all BATS markets from a single connection?
Yes, Members will have the ability to access all five markets using a single physical connection, whether that be a 1-gigabit or 10-gigabit physical connection to the exchanges from a PoP (Point of Presence) in NY4 or Weehawken or connecting directly in NY5. There will be separate FIX or BOE logical sessions that Members will need to connect to for each exchange. However, they will all be using a unified protocol and those can be found here.
Will the 2015 EDGA and EDGX move to NY5 occur on a single day?
Yes, we will be migrating EDGA and EDGX to NY5 on January 12, 2015. We will not be staging a transition on a symbol-by-symbol basis to avoid undue routing complexities for our customers. To ensure the migration goes well, we will be conducting multiple dress rehearsals in 4Q14 and we will allow trading of test symbols in NY5 on the new EDGA and EDGX platforms starting in 4Q14.
Regarding the planned network and connectivity testing in Q4 for EDGX and EDGA, will Members be able to conduct this testing with the physical cross-connect they may have at NY4? Or would Members need to have new infrastructure in NY5 to do that testing?
BATS will maintain a PoP at NY4 and NJ2 (Weehawken) that will enable members to conduct testing and connect to all BATS exchanges without having an infrastructure presence at NY5. All the test dates can be found at http://www.bats.com/edgeintegration/.
How is BATS handling latency differences between NY4 and NY5?
BATS has engineered equal latency between NY4 and NY5 so that members that already have their infrastructure in place at NY4 will have equidistant access to the BATS exchanges in NY5 as those members with infrastructure in NY5.
To ensure a seamless transition to NY5 while preserving the ecosystem in NY4, BATS will engineer connectivity with equal latency from both BATS/Direct Edge NY4 and NY5 demarcation points to all BATS/Direct Edge matching engines in NY5 for the foreseeable future.
Which order entry protocols will be supported?
The BATS FIX and BOE order entry protocols will be the standard protocols across all four exchanges. For a period of time, a FIX compatibility mode which emulates the Direct Edge FIX implementation will be provided. A compatibility mode will not be provided for the XPRS API, and all XPRS users will need to certify for BATS BOE or FIX. For market data, BATS TCP and Multicast PITCH will be used for all four exchanges.
Where can I find additional information about the integration?
More details regarding the integration and timeline are available on our website at www.bats.com/edgeintegration.
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