A planned merger between US equity exchange operators BATS Global Markets and Direct Edge announced in August will lead to better outcomes for the buy-side, the firm’s future president has said.
The two businesses will leapfrog Nasdaq to become the second largest equities exchange operator by market share. It will operate under the BATS Global Markets name, with current BATS CEO Joe Ratterman retaining his post, while Direct Edge CEO William O’Brien will take the role of president.
Speaking to theTRADEnews.com, O’Brien said the merger would lead to favourable outcomes for buy-side investors at a time when they are re-evaluating how they interact with the sell-side and exchanges.
“We have a unique opportunity to meet the evolving needs of the buy-side with respect to how they connect to the street, consume data and execute trades,” O’Brien said, adding he would continue meeting with buy-side firms to tailor new initiatives to their needs.
Market data will be a specific focus for the combined entity and O’Brien said reducing costs and improving the quality of data content for buy-side firms would be key.
“Bringing Direct Edge and BATS together consolidates market share, but
from the perspective of end users of market data, it will become more strategic for tactical growth,” he said.
The New York Stock Exchange will remain the only venue with a larger combined market share in US equities.
In July, Direct Edge and BATS combined represented a total of 22.29% of US equity market turnover across four exchanges, compared to 20.43% for Nasdaq according to Thomson Reuters figures. For the same period, NYSE attracted 25.63% market share trading in the lit market.
All four US equity exchanges run by the two firms will continue to operate, according to BATS, in addition to BATS’ US options exchange and the BATS Chi-X Europe exchange. Direct Edge will also continue 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.