BATS and Direct Edge merger to shake up US market

Exchange operator BATS Global Markets has agreed to merge with Direct Edge, creating the second largest equity market operator in the US.

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Exchange operator BATS Global Markets has agreed to merge with Direct Edge, creating the second largest equity market operator in the US.

Post merger, the two businesses will operate under the BATS Global Markets name. Financial details of the transaction have not been disclosed.

The merger will make BATS the second largest exchange group in the US by market share, overtaking Nasdaq.

In July, Direct Edge and BATS combined represented a total of 22.29% of US equity market turnover across four exchanges, according to figures from the Thompson Reuters Equity Market Share Reporter.

Nasdaq accounts for 20.43% of market share across its three equity exchanges, while NYSE Euronext is the market leader with 25.63% of US equity market volume across three exchanges.

BATS CEO, Joe Ratterman, said: “This agreement is an important milestone for the US equities market and other markets around the globe as it will combine two organisations that have been innovative in creating a more competitive marketplace to benefit all investors.”

Ratterman will remain as CEO following the merger, while Direct Edge CEO, William O’Brien, will become president of the enlarged group.

The company will use BATS’s proprietary technology and be headquartered in Kansas City. It hopes the deal will generate significant operational efficiencies and cost savings.

All four US equity exchanges will continue to operate, according to BATS, in addition to BATS’s US options exchange and the BATS Chi-X Europe exchange. Direct Edge is also continuing with plans to launch a Brazilian equity market.

Existing BATS shareholders will remain, while Direct Edge’s largest shareholders, Citadel and Goldman Sachs, will join the BATS board.

The deal is pending regulatory approval and is expected to close in the first half of 2014.

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