ISE Stock Exchange Will Be Closed After Direct Edge Deal
Friday August 22nd, 2008 / 15h44
By Doug Cameron Of DOW JONES NEWSWIRES CHICAGO -(Dow Jones)- The International Securities Exchange unit of Deutsche Boerse AG (DB1.XE) will close its U.S. equities unit after completing a merger with Direct Edge Holdings LLC.
Direct Edge Chief Executive William O'Brien said the ISE Stock Exchange business would be "decommissioned" when his company secures regulatory approval to convert its two trading platforms to full exchange status.
Direct Edge said the deal would "accelerate" its transformation to exchange status, but did not give a targeted time scale.
The ISE unit will be maintained alongside the two Direct Edge platforms until approval is secured. O'Brien said the ISE unit would give it some of the credentials of an exchange as it awaited approval.
ISE, the second-largest U.S. options exchange, agreed Friday to take a 31.54% stake in Direct Edge, which has expanded over three years to capture 4% of U.S. equity execution, reaching 6% of trades in recent week.
ISE launched its own equity business two years ago, targeting the new breed of algo traders. O'Brien said the combination "would bring non-traditional liquidity" into the market served by Direct Edge.
O'Brien said the parties had been in talks for several months, with ISE selected as the "best" partner.
Direct Edge, alongside larger rival Bats Trading, is challenging the dominance of NYSE Euronext (NYX) and Nasdaq OMX Group Inc. (NDAQ) through a mix of faster trading and keen pricing. Both are backed by large users, including banks and brokerages.
Bats Trading this week won regulatory approval to convert into a full stock exchange, a move aimed at boosting its 10% share of U.S. equity trades by up to 5% by the end of the year.
It is also launching a European arm that will compete with existing exchanges such as Deutsche Boerse's Frankfurt Stock Exchange, London Stock Exchange Group PLC and the Euronext group of bourses.
Gary Katz, CEO of the ISE, said the focus of the latest venture would be on the U.S. market, though potential collaboration with Deutsche Boerse and its Eurex derivatives arm was a future possibility.
Eurex, the derivatives platform jointly owned by Deutsche Boerse and SWX Swiss Exchange, paid $2.8 billion last year to acquire ISE.
-By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com
Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: djnewsplus.com. You can use this link on the day this article is published and the following day.
Friday August 22nd, 2008 / 15h44 |
