BATS And Direct Edge Merge To Create No.2 Stock Exchange

BATS And Direct Edge Merge To Create No.2 Stock Exchange

BATS Global Markets, Inc. Class A Common Stock (BATS:BATS) and Direct Edge Holdings LLC announced Monday that the two stock exchange operators have agreed to merge. The official announcement follows Friday’s reports that the two companies are in advanced merger talks. The deal is expected to close in the first half of 2014.

BATS And Direct Edge Merge To Create No.2 Stock Exchange

BATS-Direct Edge merger to close in 2014

After the planned merger, the newly-formed company will replace the NASDAQ OMX Group, Inc. (NASDAQ:NDAQ) as the second largest stock exchange operator in the country by volume after NYSE Euronext (NYSE:NYX). Currently, Direct Edge occupies third spot while BATS is the fourth largest exchange operator based on trading volume. Both of them favor high speed electronic trading. The announcement comes only a few days after NASDAQ halted trading due to technical problems.

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BATSDirect Edge

BATS Global Markets, Inc. CEO Joe Ratterman said the two customer-focused operators will combine to drive further innovation to serve investors. Terms of the deal were not disclosed. The transaction is subject to approval by the Department of Justice and Securities and Exchange Commission. BATS Global Markets CEO Joe Ratterman will continue to serve as the CEO of the merged company while Direct Edge chief executive William O’Brien will become the president.

Merged company to use proprietary BATS technology

The merged company will be headquartered in Kansas City with additional offices in New York, Jersey City N.J, and London. BATS operates two exchanges, BATS BZX and BYX, and Direct Edge runs the EDGX and EDGA exchanges. All four equity exchanges will remain in operation post-merger, the companies said. In addition, BATS Global Markets also runs a U.S. equity options market and the largest stock exchange in Europe by market share, BATS Chi-X Europe. Meanwhile, Direct Edge is opening a Rio de Janeiro-based electronic stock exchange, Direct Edge Brazil, for Brazilian equities trading. The new company will use the proprietary BATS technology.

Broadhaven Capital Partners advised BATS Global Markets, Inc. while Direct Edge was advised by Evercore Partners Inc. (NYSE:EVR) and Bank of America Merrill Lynch. Last year, BATS Global Markets Inc. planned to go public by listing on its own stock exchange, according to Jacob Bunge of The Wall Street Journal. But it had to withdraw its IPO after technical glitches that forced the stock exchange operator to halt trading.

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