Bracing For BATS IPO This Week (BATS, NYX, NDAQ, CBOE)

A new exchange is coming to the world of public stock and financial market exchanges this week.  The initial public offering for BATS Global Markets is going to be highly watched because it is an alternative exchange to NYSE Euronext, Inc. (NYSE: NYX) and to The NASDAQ OMX Group, Inc. (NASDAQ: NDAQ).  Barron’s reported this last weekend that it was to be a promising deal and traders seem warm to the name so far. The exchange also competes with CBOE Holdings, Inc. (NASDAQ: CBOE) in the world of options trading.

What is interesting is that this one may be difficult for Joe Public to play in.  It may even be a bit difficult looking up a quote for some investors because the shares might not appear on all stock market quote systems immediately because it is not NASDAQ-listed nor NYSE-listed.

We are looking for about 6.3 million shares to be sold after a Thursday pricing with an expected price range of $16.00 to $18.00 per share.

BATS is one of our own TOP 17 IPOs TO WATCH IN 2012.

When Barron’s reported the deal it called BATS an attractive bet as a fast-growing electronic trading platform which has taken market share and crossed into new markets.  It is also indicated around 17-times current earnings, and investors need to consider that this is a premium to both the NASDAQ’s and NYSE’s 12-times earnings multiples.  The CBOE trades at almost 18-times trailing earnings.

The exchange claims to be the third largest exchange now with 10.9% market share in the U.S. per the company’s February share volume versus a market share of 10.7% a year ago.  Its options trading called BATS Options reported a 2.8% market share compared to 1.7% a year ago with average daily matched volume of 483,306 contracts.

BATS operates two stock exchanges in the U.S., the BATS BZX Exchange and BATS BYX Exchange; BATS Options, a U.S. equity options market; and BATS Europe and Chi-X Europe, which operate FSAauthorized multilateral trading facilities.

The underwriting group is rather large.  Lead underwriters are Citi, Morgan Stanley, Credit Suisse; additional underwriters are Deutsche Bank Securities, Wedbush Securities, J.P. Morgan, Bank of America Merrill Lynch, Raymond James, Sandler O`Neill & Partners, Rosenblatt Securities, and Nomura.

Here is the retail roadshow.

JON C. OGG