Kansas-based ECN operator Bats Trading has received approval from the US Securities and Exchange Commission (SEC) to operate as a registered national securities exchange.
Bats says the transition into an exchange is expected to take around 60 days.
The firm originally filed for exchange status in November 2007 and later hired Eric Swanson - who served at the SEC from 1996-2006 - as general counsel with a primary brief to push the application through.
The Bats ECN, which is designed to handle high-speed, high-volume and anonymous algorithmic trading for broker-dealers, launched two and a half years ago and now claims around a 10% market share in US equities. A one month aggressive pricing plan in January 2007 has helped drive trade volumes and forced both Nasdaq and the New York Stock Exchange (Nyse) to cut their fees.
Furthermore, in January this year the Bats ECN crossed the one billion volume mark for the first time. In the same month JPMorgan and Deutsche Bank became the latest in a number of Wall Street banks to invest in the ECN operator. Merrill Lynch, Morgan Stanley, Credit Suisse, Lehman Brothers and Citi also hold stakes in the company.
Bats CEO Joe Ratterman has repeatedly stressed the motivation to become an exchange stemmed from the desire to participate directly in the national market system and compete on a level playing field with Nasdaq and Nyse.
Commenting on the SEC's approval, Ratterman says: "It's a very gratifying day for the Bats team, and an important moment for the marketplace as a whole."
"We realise there is a lot of hard work ahead of us as we take on added regulatory responsibility, but we look forward to the challenge," he adds.
Bats is also looking to move into the European markets and take advantage of the EU's Markets in Financial Instruments Directive (MiFID) by launching a platform that will compete with the region's domestic exchanges.