batsThe ETF marketplace changed last month. You didn’t notice? Don’t worry, you’re not alone. Today I’ll tell you all about it.

You already know that “exchange traded funds” trade on an exchange. That’s what distinguishes them from old-fashioned mutual funds. But what exchange trades them, and where is it?

For some new iShares, the answer isn’t New York or Chicago. Their trading hub is Lenexa, Kansas. Let me explain …

Exchange Floors No Longer Needed

For most people, the term “stock exchange” brings to mind images of noisy rooms filled with men in colorful jackets, waving their arms and making cryptic hand motions.

At one time, this is exactly how trading got done — and the apparent chaos was actually very efficient. But now, even the nimblest floor traders can’t compete with the speed and accuracy of modern computers.

An “exchange” isn’t a physical place anymore. It’s a mechanism by which buyers and sellers find each other. Nowadays, it happens in milliseconds.

Not surprisingly, then, there’s no longer a need for traders and exchanges to stay in lower Manhattan. The New York Stock Exchange and Nasdaq don’t get it — yet. They will. Their customers are going BATS.

Kansas: The New ETF Capital

From its headquarters in a Kansas City suburb, BATS Global Markets is now the nation’s third-largest securities exchange. The company launched its first trading system in 2006. Then in 2008, it was acknowledged by the SEC as a “national securities exchange” on par with the NYSE and Nasdaq. BATS is an acronym for “Better Alternative Trading System.”

The founders of recognized that stock exchanges are really in the technology business. Trade processing isn’t rocket science, and it doesn’t take financial genius. The keys to success are accuracy, reliability, and low costs.

Locating in Kansas is a great way to keep your expenses down. Everything from office space to taxes is much lower than New York. Over time (and millions of transactions) the difference adds up.

BATS — maybe because it has some distance from the traditional exchange culture — is innovating in other ways, too. The company is planning a “Competitive Liquidity Provider” program that will give market makers a financial incentive to increase liquidity and keep bid/ask spreads tighter.

It’s working: Last year BATS had an 11 percent share of U.S. stock market activity. The firm’s European unit, when combined with another exchange BATS is in the process of acquiring, had a 25 percent market share.

Now BATS is going for the jugular. The upstart wants to lure primary listings away from the big exchanges, starting with ETFs. iShares was the first sponsor to make the leap — but I bet more will follow.

Why You Should Care!

For small investors, this may seem like “inside baseball.” You may not know or care how it all works. You just want to buy and sell at a fair price. You trust your broker to handle the details.

That’s exactly why you should be glad BATS is on the scene. The competition they’re creating, both for listing fees and trading volume, is what keeps your costs down.

So whether you knew it at the time or not, the January 24 launch of iShares MSCI Norway Capped Investable Market Index Fund (ENOR) on BATS was a big deal! ENOR was the first of seven new single-country ETFs from iShares in January. BATS is the primary exchange for all of them. Two more are coming soon.

I don’t know if iShares intends to keep listing new ETFs on BATS. Nevertheless, the vote of confidence from the world’s largest ETF sponsor means something.

Unfortunately, some stock quote services are not yet set up to recognize BATS as the primary (or only) exchange for securities. I expect this to be fixed soon. But in the meantime, you may have a little trouble getting quotes on the BATS-listed ETFs.

Will BATS take over the world? No — there will always be room for competition. But the fact that this firm exists at all is still remarkable.

ETFs were a revolution in themselves. They’ve transformed the entire money management industry. Now the revolution is entering a new stage — and you’re set to be one of the winners.

Disclosure covering writer, editor, and publisher: No positions in any of the securities mentioned. No positions in any of the companies or ETF sponsors mentioned. No income, revenue, or other compensation (either directly or indirectly) received from, or on behalf of, any of the companies or ETF sponsors mentioned. This article originally appeared in Money and Markets, a free daily investment newsletter from Weiss Research. To view archives or subscribe, visit