The malfunctions may refocus scrutiny on modern American market structure, where two decades of government regulation have broken the grip of the biggest exchanges and left trading fragmented over as many as 50 venues. Bats, whose name stands for Better Alternative Trading System, rose to prominence in tandem with the proliferation of electronic firms that now dominate the buying and selling of equities in the U.S.

A single trade for 100 shares executed on a Bats venue briefly sent Apple down to $542.80, according to data compiled by Bloomberg. The order was executed at 10:57 a.m. New York time. Two more transactions, which sent the stock back above $598, were made before the halt. The stock stayed around that level once trading resumed five minutes later.

Bats sent a notice about 10 minutes before the Apple trade saying it was investigating "system issues" affecting companies with ticker symbols ranging between A and BF. Apple's is AAPL. Bats's ticker is BATS.

Bats said in a regulatory filing that it "experienced very low downtime" last year. BZX Exchange, its main market, was accessible to users 99.94 percent of the time. BYX Exchange, its second market, was available 99.998 percent of the time, the company said. The main market processed an average of about 29,000 order messages per second last year, Bats said.

'Reliability'

"Historically, Bats has been very reliable, but this is a question going forward," Bruce Weber, dean of the Lerner College of Business and Economics at the University of Delaware in Newark, Delaware, said in a phone interview. "The competition that entrants like Bats has brought is good. They have to provide the reliability investors expect to sustain their role."

As of the pricing yesterday, the third-largest U.S. stock exchange operator had raised $100.7 million in its initial public offering yesterday after selling shares at the bottom of the proposed range. Bats sold 6.3 million shares for $16 each on behalf of existing stockholders. The company had offered them for $16 to $18, according to a regulatory filing.

Founded by a high-frequency trader in 2005, Bats was steered to prominence by brokers trying to hold down fees as the New York Stock Exchange and Nasdaq Stock Market bought their biggest electronic rivals. The company executed 10.9 percent of U.S. equities volume last month, compared with 10.7 percent a year earlier, it said.

The exchange operator raised money less than two years after a crash erased $862 billion in less than 20 minutes from U.S. share values, a plunge that some critics linked to the fragmented electronic market structure that helped Bats thrive. The company was initially built to service high-frequency firms like Tradebot Systems Inc., whose chief executive officer founded Bats. Automated trading firm Getco LLC in Chicago and Wedbush Inc., owner of a Los Angeles-based investment bank whose clients include high-speed firms, bought equity stakes.

An official with the Securities and Exchange Commission's enforcement division said last month that the agency is examining equity trading practices that gained dominance in the past decade amid the shift automation. Daniel Hawke, head of the market-abuse unit, said the SEC is looking into techniques such as co-location, in which exchanges let traders place computers close to the market's systems to shave time off executions.

Bats itself got a request from the SEC for information on the types of orders customers use on its venues. The request, disclosed in a regulatory filing Feb. 23, sought information about how order types have evolved at the company. Bats said regulators asked for documents "related to the development, modification and use of order types, and our communications with certain market participants," including some of Bats' owners.

About 55 percent of U.S. equities volume comes from firms using high-frequency trading strategies, Adam Sussman, a partner and director of research at Tabb Group, said in December. More than half of that — 32 percent of total stock volume — is from market makers supplying bids and offers, he said.

"As all the exchanges have gone more toward electronic trading, and high-frequency, algorithmic trading, there are more risks of these things happening," said Nick Einhorn, an analyst at Renaissance Capital LLC, a Greenwich, Connecticut-based IPO research and investment firm. "Obviously, it's not a particularly good start."

 Bloomberg News

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