BATS and Direct Edge Exchanges Agree to Merge

BATS Global Markets and Direct Edge have agreed to merge, which will make the combined operation the second-largest stock exchange in the U.S. behind the NYSE Euronext and surpassing the NASDAQ.

Pending regulatory approval, the companies expect the merger to close in the first half of 2014, but no financial terms have been disclosed. Under the agreement, the two exchanges will operate under the BATS name and will continue to use BATS’ proprietary technology. Joe Ratterman, the current BATS CEO, will remain as the CEO of the combined company, and William O’Brien, the current Direct Edge CEO, will become president of the new entity.

After the merger, all the exchanges currently operated BATS and Direct Edge—the BATS BZX and BYX Exchanges and the Direct Edge EDGX and EDGA Exchanges—will continue to run. Also, BATS’ headquarters near Kansas City, Missouri will remain as the main office for the combined company, which will also operate offices in New York, London and Jersey City, New Jersey.

“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,” said Ratterman.

“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. Together, the best of both organizations will work to further improve how the world trades, consumes market data, and accesses capital markets,” said O’Brien.