Electronic stock exchange operator Bats has announced the planned introduction of the Bats ETF Implied Liquidity Feed, which will provide investors with a reference view of the current liquidity supporting the exchange’s listed ETFs.
Laura Morrison, senior vice president, global head of ETPs at Bats.
The feed, filed and pending publication by the Securities and Exchange Commission, measures the implied liquidity of a fund using select data points, which includes information regarding the ETF’s underlying securities. The feed includes a proprietary calculation of a fund’s implied liquidity and the aggregate best bid and offer of all displayed orders across the four Bats equity exchanges.
According to Bats, the feed will provide a range of benefits throughout the ETF trading lifecycle. Pre-trade, the feed allows investors to better understand fund liquidity when selecting investable ETFs, and better estimate trading costs before placing orders. During trading, the feed allows investors to adjust limits to enhance the probability of orders being filled, and evaluate block-trading proposals in real-time. Post trade, investors can use the feed as a reference to measure efficiency of trade execution by comparing the completed trades against historical implied quotes and size.
Accordingly, the feed gives an accurate representation of the true value of an ETF intraday, distinct from other common metrics, like average daily volume (ADV) or Net Asset Value (NAV).
Laura Morrison, senior vice president, global head of ETPs at Bats, said: “The creation of the Implied Liquidity Feed is another example of our drive to grow the ETF market, deepen liquidity and ultimately improve ETF market structure. This feed, which is a market first, is designed specifically to improve transparency for all participants by creating a common reference guide. In giving a clearer indication of liquidity, it should encourage investing interest, particularly in less active, or newer funds. In turn, that should encourage asset growth in more funds across a broader swathe of issuers.”
Kevin Carrai, vice president, market data and access services, added: “Bats’ ongoing mission is to increase transparency and market participation, and we believe that the Implied Liquidity Feed will help promote both in the ever-expanding US ETF market. The Implied Liquidity Feed is designed to support many types of customers from institutional to everyday investors, and will be accessible via direct exchange feeds and through our distribution partners.”