The face of the global stock market used to be the classically proportioned exchange building on Wall Street.
In the future, it may well be a squat suburban office building in Lenexa, Kan., outside Kansas City, where BATS Global Markets is based.
While the New York Stock Exchange has been swallowed up by the InterContinental Exchange, a company that gets most of its revenue from trading derivatives, BATS, founded in 2005, has been doubling down on vanilla stock trading and global expansion. That steady business has moved it closer to the top of the list of the largest stock exchange operators in the world in terms of the value of shares traded.
BATS is set to complete its merger with another upstart company, Direct Edge, in a deal that will turn it into what will most likely be the biggest U.S. stock exchange company.
In Europe, BATS is already the largest exchange after a rapid, and mostly overlooked, ascent that now has it hosting trading in nearly all the big economies on the Continent. It is looking to take on other parts of the globe, including Canada and Japan.
BATS aims to serve as an evangelist for the American way of trading, focusing on low costs, competition and high-speed trading.
In the rest of the world, older exchanges and some established trading firms have pointed to the recent market crashes and other problems as evidence of flaws in the U.S. model. But BATS is winning over enough traders and banks to keep the expansion going.
Paul Squires, the head of trading at AXA Investment Management in London, said that initially he was skeptical of BATS.
Over time, though, Squires said that the company had been more responsive to his questions and concerns than the old exchanges ever were. He has also found BATS to be half or less of the cost of the big exchanges.
“We've overcome that psychological, initial judgment,” Squires said. “Now it doesn't bother me at all if there is an Americanization of our markets.”
BATS has been taking advantage of the difficult conditions prevailing in the stock world, where trading volumes have been falling for a long time, along with the fees that exchanges are able to charge.
BATS has a relatively small staff of about 170 and a basic technology that can be exported anywhere. It has succeeded with this formula despite the company's most embarrassing moment, when it had to call off its own initial public offering in 2012 because its software went haywire.
BATS' latest big campaign was in Spain. Over the last year BATS Chi-X, as it's known in Europe, has gone from about 4 percent of all trading in Spain to almost 20 percent.
That is about where it is for the Continent as a whole, in the value of shares traded. The next biggest exchange operator in Europe is the London Stock Exchange.
In the United States, BATS and Direct Edge together hosted around 10 percent of all trading in the last month, compared with the NYSE, which had a little less than 22 percent on its three exchanges.
BATS began in Spain, as in most other places, by bringing in the big global banks that wanted a cheaper and more seamless way to trade stocks across national boundaries. Now, though, the privately held exchange is pressing hard to woo local brokers.
No one has fought BATS harder than the national exchange in Madrid and its chairman, Antonio Zoido Martinez.
Zoido notes that BATS offers cheaper trading, but he argues that BATS does not partake in the most basic social functions played by exchanges.
BATS does not list new stocks, for instance, which is what allows companies to raise money from investors. BATS also tends to shut down when the main national exchanges are down, suggesting that BATS is relying on the national exchanges to determine the proper price of stocks.
“If it moves to another degree then it's dangerous for the society, and for the things that exchanges exist to do in society,” Zoido said.
The chief executive of BATS' European operation, Mark Hemsley, says BATS' limitations are primarily a result of barriers put up by the existing exchanges.
The existing exchanges in Europe were “monopolies that were willing to work together by not going into each other's backyards,” Hemsley said. “We put our feet in everyone's backyard.”