Chris Concannon will be taking the reins at BATS Global Markets Inc. with an eye toward expanding the firm's trading in foreign-exchange forward contracts and possibly in precious metals.
Mr. Concannon, who will add the CEO title to his duties as president of Kansas City, Mo.-based BATS on March 31, said in an interview that the pending acquisition of institutional spot foreign-exchange network Hotspot FX, once completed, could serve as a springboard into broader FX markets, specifically forwards, in which different currencies are exchanged at a later date with an exchange rate set in advance. BATS in January announced an agreement to acquire Hotspot from KCG Holdings Inc. for $365 million in cash.
“FX is one of the most enormous markets,” Mr. Concannon said. “Our opportunity in that area is global. Our resources are focused on that through the Hotspot acquisition. The global FX market is somewhere around $5.3 trillion; of that, $2 trillion is in the spot FX market, which is what's traded through Hotspot. But there's the remaining $2 trillion or so in forwards and NDFs” or non-deliverable forwards, which are future trades of a currency that is not internationally traded, such as the Chinese renminbi.
Mr. Concannon said growth in those markets would be done organically by expanding Hotspot rather than by acquisition of other exchange venues. “Hotspot trades in spot FX, and traders in that also trade in forwards. So the growth would be through product expansion,” he said.
He also said there are future opportunities in building exchanges that trade precious metals, like gold, palladium and silver.
“Those are also huge markets, and we're interested in those as well,” he said, adding that such expansion would most likely be done internally and not through acquisition.
A fixed-income exchange, however, would be a tougher market to service. BATS does not offer a bond-trading venue, instead focusing on equities and futures as well as its pending FX market. “Fixed income is a much harder market,” he said, citing reduced liquidity as a chief drawback to expansion.
Although Mr. Concannon said most of BATS' future growth would come from within, the company's recent expansion has come through the purchase of external trading venues. Mr. Concannon led the acquisition effort for Hotspot, which was announced within two months of his joining BATS as president on Dec. 15. Prior to that, he had been president and chief operating officer at high-frequency trading firm Virtu Financial LLC, New York.
Joseph Ratterman, who relinquishes the CEO position to Mr. Concannon next month to become BATS board chairman, was president before Mr. Concannon's arrival. Mr. Ratterman replaced William O'Brien, who had been CEO of Direct Edge Holdings LLC, an exchange operator acquired by BATS in early 2014.