January 31, 2014

Merger of Bats and Direct Edge is approved

The two stock exchange operators said the last regulatory hurdle has been cleared, leaving them to combine into one operator on the same scale as the New York Stock Exchange and Nasdaq markets.

A merger of the nation’s third and fourth largest stock exchange operators passed its last regulatory hurdle and stands days from completion, the companies said Friday.

Lenexa-based Bats Global Markets Inc. and New Jersey-based Direct Edge Holdings LLC would combine into one market operator with trading volume in the same range as the New York Stock Exchange and Nasdaq markets.

The companies said their merger, announced in August, won approval from the Securities and Exchange Commission, its last step before consummation.

“With the final regulatory approval received, we are focused on closing the merger during the current quarter and beginning the integration of our two highly complementary companies,” Bats chief executive Joe Ratterman said in the announcement.

The combined operations would use the Bats name, its Lenexa headquarters as the corporate home and Bats’ technology to operate their separate stock exchanges.

Both companies had emerged as alternative trading centers, offering electronic venues away from Wall Street’s established markets. In announcing the merger, the companies said their combined size would add to their credibility and competitiveness.

In December, Bats’ markets handled 9.9 percent of U.S. equity trading volume and Direct Edge’s handled 10.4 percent. At the time of the merger announcement, estimates had put Nasdaq’s share of trading volume at 18 percent and the New York Stock Exchange at 23 percent.

Bats was formed in Kansas City in 2005 and moved to Lenexa in 2008.

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