BATS Global Markets, Inc. Q2 2010 | August 2010. Agenda Why Price Slide? Display Price Sliding Mechanics Two Penny Wide BATS Market Multiple Display Price.

BATS Global Markets, Inc.Q2 2010 | August 2010

Agenda

• Why Price Slide?• Display Price Sliding Mechanics• Two Penny Wide BATS Market• Multiple Display Price Sliding• Hidden Orders and Midpoint Pegs

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Why Price Slide?

Rule 610(d) of Regulation NMSExchanges must establish, maintain and enforce written rules that require members to

reasonably avoid displaying quotations that lock or cross any protected quotation in an NMS stock.

NBO: $20.01

NBB: $20.00

BATS Bid: $20.01

$20.02

Display Price Sliding allows BATS to comply with Rule 610(d) by sliding the Display Price on a BATS order that

would lock or cross a Protected Quotation.

Display Price Sliding Mechanics

BATS Bid

BATS Offer

NBO

NBB

BATS Bid

Display Price on this order is slid to $20.00

BATS still displays a quote of $20.00 x $20.02 even though the BATS book is now effectively $20.01 x $20.02.

$20.00

$20.01

$20.02

An aggressive sell order with a limit price of $20.00 targeting the NBB will be executed at $20.01 on BATS against the slid buy order. This seller receives $0.01 in

price improvement.

Display Price Sliding Mechanics

BATS Bid

BATS Offer

NBO

NBB

BATS Bid

$20.00

$20.01BATS Sell @ $20.00

Display Price Sliding Mechanics

Two events can cause an “un-slide”

$20.02BATS Offer

NBO

NBB

BATS Bid

$20.00

$20.01

BATS Bid

1. Change in a Protected Quotation

BATS now displays a quote of $20.01 x $20.02.

Display Price Sliding Mechanics

Two events can cause an “un-slide”

$20.02BATS Offer

NBO

NBB

BATS Bid

$20.00

$20.01

BATS Bid

2. BATS ISO (which changes BATS’ view of the Protected Quote)

BATS Bid (ISO)

BATS now displays a quote of $20.01 x $20.02.

$20.02

Prior to September 16, 2011, a two-Penny-Wide BATS book was unable to tighten due to a slid order.

Two-Penny Wide BATS Market

BATS Bid

BATS Offer

NBO

NBB

BATS Bid

Display Price on this order is slid to $20.00

BATS still displays a quote of $20.00 x $20.02 even though our book is now effectively $20.01 x $20.02.

$20.00

$20.01BATS Post Only Offer

Cancelled: Would Remove!

BATS BidBATS Post Only Offer

$20.02

The Enhancement

Two-Penny Wide BATS Market

BATS Bid

BATS Offer

NBO

NBB $20.00

$20.01

$20.005

BATS book has now tightened to $20.00 x $20.01 equaling the NBBO. The slid bid is still displayed at $20.00, but the order is now only executable at $20.005.

BATS Bid

BATS Post Only Offer

$20.02

The Enhancement (cont.)

Two-Penny Wide BATS Market

BATS Bid

NBO

NBB $20.00

$20.01

$20.005

If the Post Only Offer is removed (due to execution or cancellation) from the book, the executable price on the slid bid is adjusted back to $20.01.

BATS Offer

Benefits of the Enhancement

• BATS’ market is able to tighten so that it equals the width of the prevailing NBBO.• Liquidity providers may always tighten the BATS market to the NBBO with a Post Only order.• Reduces number of “WouldRemove” cancellations resulting in less system load and fewer repeated attempts from liquidity providers trying to tighten the BATS book.

Multiple Display Price Sliding (MDPS)

Anticipated to be most commonly used with securities in a Reg SHO Circuit Breaker (Short Sell Circuit Breaker). Sending DisplayIndicator(9479)=M allows a displayed

order to ratchet up or down as the Protected Quote changes.

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$20.02

BATS Bid

BATS Offer NBO

NBB

$20.00

$20.01BATS Short Sell ($19.75 limit)Non-Post-Only

Short Sell Order is slid (display and working price) to NBB + 1 trading increment

BATS Short Sell ($19.75 limit)Non-Post-Only

Short Sell Order ratchets down to NBB + 1 trading increment when NBB changes

Multiple Display Price Sliding is scheduled to be available on BATS BZX and BYX on August 24, 2012.

Multiple Display Price Sliding (MDPS)

MDPS can also be used with standard limit orders in order to allow them to work at the most aggressive price possible based on the prevailing NBBO.

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$20.02

NBO

NBB $20.00

$20.01

BATS Buy Order ($20.05 limit)

BATS Offer

BATS Buy Order ($20.05 limit)

Display Price on this order is slid to $20.00

When the NBO lifts, MDPS allows the buy order to also lift. This results in an execution against the $20.02 offer on BATS.

Hidden Orders

Hidden orders can be used to post an order to the BATS book that is not displayed to the rest of the market. Hidden

orders have a lower priority than displayed orders at the same price.

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$20.02

BATS Bid

BATS Offer NBO

NBB $20.00

$20.01

BATS Hidden Bid

A sell order at $20.00 would execute against all displayed bids at $20.00 before executing against the Hidden bid at $20.00.

BATS Hidden Post Only Bid - Executable

Hidden Orders

Hidden orders that are also Post Only will be accepted even if the order locks or crosses the displayed BATS book, but they are only executable at the midpoint when displayed

liquidity locks the hidden order.

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$20.01

BATS Bid

BATS Offer NBO

NBB $20.00

$20.005

BATS Hidden Post Only Bid

Midpoint Peg Orders

Midpoint Peg orders are hidden orders that are pegged to the midpoint of the NBBO. Midpoint Peg orders always

work at the true midpoint, even if the true midpoint is a ½ penny price.

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$20.01

BATS Bid

BATS Offer NBO

NBB $20.00

$20.005BATS Midpoint Peg Buy

A Midpoint Buy and a Midpoint Sell can co-exist as long as the inbound order is Post Only.

BATS Midpoint Peg Sell Post Only

Disclaimer: BATS makes no representations or warranties as to the accuracy or completeness of the information provided in this presentation. BATS will not have any liability to any party resulting from the use of the information contained in this presentation.