In less than eight years, Bats Europe has gone from being a one-man operation in a City of London coffee shop to the largest stock exchange on the continent by market share and value traded.
But despite its growth, the company’s chief executive – and first employee – Mark Hemsley still likes to emphasise its small business charm.
“We’re not this exchange that you can visit and you get shown up by 19 security guards,” he says. “We don’t work like that.”
The company was launched on 31 October 2008 (“being Bats, you’ve got to go live on Halloween”) as a subsidiary of US-based Bats Global Markets from Fly One Cafe on Copthall Avenue, near Moorgate.
Nowadays, Bats Europe shares Richard Desmond’s Northern and Shell Building on Lower Thames Street with the likes of the Daily Express and Daily Star newspapers.
It’s not quite Paternoster Square, where the London Stock Exchange (LSE) is headquartered. But that doesn’t mean the LSE won’t be paying attention today as Bats Europe launches a new UK-focused benchmark index series with the aim of shaking up what Hemsley described as a “monopolised” market.
Working closely with “incredibly frustrated” index customers
The chief executive sees today’s launch as the latest in a series of moves – he claims credit for driving down fees associated with trading and clearing – that have led to Bats Europe being seen as the “Uber of the exchange world”.
Hemsley describes Bats Europe as a “fast-moving”, “technically astute” company with a low cost-base that tries to “work incredibly closely with customers”.
Working closely with “incredibly frustrated” index customers is what led to the launch of today’s new index series, Hemsley says.
“Customers actually just [got] to the point where they [were] frustrated enough to want change,” he says. “And we were the natural lightning rod for that frustration, saying: ‘Please come in and do something about this.’”
Today, Bats Europe’s indices have been launched with the promise of reduced fees – “we’ve heard some horror stories!” – and real-time data provided to customers, an improvement on a “ludicrous” 15-minute delay – “in trading, 15 minutes is an eternity”.
Why is the product being launched now? Hemsley bats away the suggestion recent technological advancements have facilitated a real-time service, instead pointing again to customer frustrations and an unchallenged market that has not, until now, needed to up its game.
“Seeing other people coming up with indices and fresh ideas and aggressive pricing means there’s just pressure on the monopoly to break,” he says. “And our view is we can go and take a reasonable chunk of this – we won’t take all of it, but we can go and be aggressive and go and take a piece of that.
“But the key thing is [to] change the mindset – change the mindset to a competitive environment rather than a monopoly-provider environment. And those people who’ve had that in the past, they rely on that inertia for their business models and for their pricing increases.”
Away from today’s launch, Bats Europe and Hemsley are also keeping a close eye on the proposed £21bn merger of the LSE and Deutsche Boerse.
He describes the deal as “entirely logical… from their point of view”, adding: “I don’t necessarily think a lot of customers will be comfortable about it. Because it does, particularly in a post-trade space, consolidate an awful lot of influence in one place.” Hemsley also notes that the “competition review is going to be very interesting”.
“If I was in their shoes, I would make sufficient concessions to make sure you got it done,” he says. “From the point of view of running those businesses, they might have to be aggressive in the concessions they make. But it’s a big enough win for them in terms of the industrial logic of what they’re doing.”
"LSE-Deutsche Borse deal would be good for London"
Could Bats Europe be interested in acquiring any businesses from LSE and Deutsche Boerse potentially hived off as part of the merger process?
“Possibly,” says Hemsley. “We’ve got a record of both organic and inorganic growth. Depending on what they were, that the conditions were associated with them, the timing, we’d certainly look. We’re open-minded on that, but we’ll wait and see.”
Would the deal be good for London? “Probably, yes – if the headquarters really does stay in London and it’s not one of these things where quietly three years later it slips across the border. I think that obviously the Brexit vote is going to be part of that subject as well.”
Read more: Brexit could cut £400bn from UK equities
While insisting their deal is not a condition of the UK’s EU membership, executives from the LSE and Deutsche Boerse have spoken out against the prospect of a Brexit. In an interview with City A.M., LSE chief exec Xavier Rolet said it would be “far worse than not good” for the City of London.
Hemsley, though, seems more relaxed – perhaps sharing a building with the eurosceptic Daily Express is taking its toll – saying no one knows what an EU exit would look like.
He also believes Bats Europe is “Brexit-proof”. He indicates that some resources would be moved away from the UK, but says “there would still be a substantial part of our operation in London”.
“We still think that even in a Brexit situation a substantial amount of flows would come through London, so we would profit from either – London flows and/or flows that are confined to the European Union for whatever regulatory or legal reason.”
In the event of a Brexit, he says “there is going to be work – I have got better things to do. I’d rather be spending my time on indices and things like that.”
He adds: “But certainly it’s not devastating for our model. And we would move early just to give customers as much confidence as possible to [show them] that we can handle this in either eventuality.” Leave or Remain, it’s going to be a busy couple of weeks.