Going to Bat for BATS

The botched IPO was embarrassing, but everyone makes mistakes

BATS Global Markets makes a big deal out of its technology, and for it to suffer such a severe glitch the other day ─ particularly with its own IPO ─ was of enormous embarrassment for the exchange. The company is known for its branded baseball bats that it tends to give out at trade shows, and there have been more than a few light-hearted jokes around the office about bashing its software stack with a big stick to make it work.

As the dust has settled, we now know that the event, which has been dubbed a classic mini-Flash Crash, unfortunately coincided with an erroneous trade in Apple's shares, which exacerbated the situation. The tech issue stemmed primarily from its software powering stock auctions, which of course is how an IPO determines its price. Executives have said that they knew within seconds that something was wrong, that something being a ripple effect that caused problems with ticker symbols A through to BF. Of course, you'd have to be fairly out of touch not to notice anything wrong when your IPO value drops from $16 to two cents.

High-frequency tantrums
Inevitably, the disastrous public offering from BATS has led to further rumination and recrimination over high-frequency trading. This, critics say, was a case in point of how utterly uncontrollable HFT can be, and how small problems can quickly escalate into large issues, sometimes within seconds. Events such as the Flash Crash galvanized opinion against the practice, and there have been multiple regulatory moves in a precursory sense against it.

But really, how bad was this crash? Sure, people missed returns from investment ─ the holding trust for Lehman Brothers being chief among slighted parties. Joe Ratterman, too, while retaining his job as CEO, has been stripped of his role as chairman in the wake of this, and important shareholders have called for bonuses to be examined. But it hasn't proved fatal for the exchange, and by all accounts, it's business as usual at BATS.

There is a strong tendency to seize upon events such as this and proclaim that they herald the absolute end of everything, ever. It's not true. While HFT will undergo a period of review and probably restriction, the focus should be more on how effective controls are at an exchange, for the monitoring and surveillance of its own market. BATS actually responded fairly well to what happened ─ again, while left red-faced, it's not exactly been brought to its knees.

Perspective
Coming back to the unfortunate baseball bats gimmick that BATS might be regretting slightly now, even that isn't the worst I've seen. Three or four years ago, I was working in entertainment journalism at another publishing house. Our newsroom lumped together film magazines, photography titles, technology monthlies and videogames periodicals under one roof, and typically, there was a lot of PR crossover. Electronic Arts (EA), in a fit of insanity while promoting Godfather II, decided that it would be a great idea to send branded knuckle dusters to journalists. As you can imagine, it was something of a disaster.

If you'd like to chat about BATS, or hear more about curious press kits I've come across (the full-length broadsword from Highlander was a particular highlight, around five years ago), then feel free to give me a call on +4420 7316 9811, or send an e-mail to james.rundle@incisivemedia.com.