NEW YORK (MainStreet)The high-profile, technology stock rich Nasdaq will take a step back, as the merger of two securities exchanges will create a new runner-up to the New York Stock Exchange.
After three years of on-again, off-again negotiations, BATS Global Markets, Inc. (BATS) and Direct Edge, LLC (Direct Edge) have announced a merger agreement that will combine the third- and fourth-largest equity exchanges upon the completion of the deal in the first half of 2014, subject to regulatory approvals.
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Financial terms were not disclosed for the transaction, but it has been made clear that current BATS CEO Joe Ratterman will remain in the same role and current Direct Edge CEO William O'Brien will be named as president. Bryan Harkins of Direct Edge will join the combined company as a member of the senior executive team. The exchange will be known as Bats Global Markets.
"This agreement is an important milestone for the U.S. equities market and other markets around the globe as it will combine two organizations that have been innovative in creating a more competitive marketplace to benefit all investors," Ratterman said in a statement.
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"Direct Edge and BATS were both founded on a commitment to create an optimal trading experience for a diverse member base, from retail investors to broker-dealers to institutions," O'Brien said. "Together, the best of both organizations will work to further improve how the world trades, consumes market data, and accesses capital markets."
The combined company will use proprietary BATS technology and will be headquartered in Kansas City, Mo. Additional offices will be located in Jersey City, N.J., New York and London. All four U.S. equity exchanges operated by BATS and Direct Edge will remain in operation under the agreement -- the BATS BZX and BYX Exchanges and the Direct Edge EDGX and EDGA Exchanges.
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BATS also operates a U.S. equity options market and BATS Chi-X Europe, the largest stock exchange in Europe. Direct Edge is also developing an equity exchange in Brazil.
--Written by Hal M. Bundrick for MainStreet