EXCLUSIVE-BATS bets on simple U.S. options price plan

* Fee of 30 cents, rebate of 20 cents across-the-board

* 10 cent fee-rebate spread mostly narrower than peers

* BATS Options, the eighth U.S. exchange, launches Feb. 26

NEW YORK, Feb 16 (Reuters) - The newest U.S. options exchange is betting that a simple, narrow pricing structure will help it elbow into the crowded but fast-growing marketplace.

BATS Options, which is set to launch Feb. 26, told Reuters it will charge 30 cents per contract to all traders who remove liquidity, and rebate 20 cents per contract to those who add liquidity -- a relatively aggressive plan meant to attract high-speed electronic traders and drive trading costs down.

The across-the-board price structure differs from the tiered structures at NYSE Euronext's NYX.N Arca Options platform and at Nasdaq OMX Group Inc's NDAQ.O NOM platform, the two exchanges that now run a similar "maker-taker" pricing system.

The plan could spark price changes elsewhere in a fiercely competitive industry that has seen relatively wide swings in market share over the last few months.

Privately held BATS Global Markets said it wants traders to easily understand the benefits offered on what will be the eighth options exchange competing for orders.

“The incentives are exactly the same for everybody; the costs are exactly the same for everybody,” Jeromee Johnson, vice president of market development at BATS, which also runs a U.S. stock exchange and a European trading venue, told Reuters.

“The pricing is very illustrative of the entire market structure that we’re putting in place, where it’s flat and it’s simple and it’s transparent.”

BATS, owned by some of the biggest banks, faces tough competition in a market where three exchanges -- the Chicago Board Options Exchange; the International Securities Exchange, owned by Deutsche Boerse DB1Gn.DE; and the former Philadelphia Stock Exchange, now called Nasdaq OMX PHLX -- commanded 70 percent of trading last month.

CBOE, the top exchange, plans to launch yet another options platform, likely this year. Meanwhile, NYSE Euronext plans to sell stakes in its Amex options exchange to market players, a move that could drive more volume its way.


Still, total options trading volume has risen the last seven years, including a 0.8 percent rise in 2009, as investors returning to the market have looked to hedge risk following the financial crisis, according to the Options Clearing Corp.

Arca, which had nearly 14 percent of the overall options market share last month, in general has higher fees and rebates than BATS. It has a fee-rebate spread of 15 cents to 20 cents, depending on the type of customer, while BATS has a 10 cent spread.

An Arca market maker -- a firm whose role is to buy and sell securities, ensuring there is liquidity on the exchange -- pays a 45 cent fee and receives a 30 cent rebate.

NOM, which had 2.6 percent market share last month, has a less complicated system that also in general has higher fees and rebates, and a spread of 10 cents to 20 cents, depending on the customer. A NOM market maker pays a 45 cent fee and receives a 25 cent rebate. Johnson said BATS will also target customers at CBOE and ISE, exchanges that have long run a so-called payment-for-order-flow system, a complicated price structure in which brokers are paid for routing orders to them.

Up to 50 companies could be set to trade when BATS Options launches next week, the company said. It will launch with options on 18 securities and add more in coming months.

BATS is owned by a consortium including JPMorgan Chase & Co JPM.N, Citigroup Inc C.N, Morgan Stanley MS.N, Credit Suisse Group AG CSGN.VX, and Getco, a big electronic market maker. Its 4-year-old stock market accounts for about 10 percent of all U.S. trading.

(Reporting by Jonathan Spicer, additional reporting by Doris Frankel; Editing by Gary Hill and Gerald E. McCormick)

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