Aug. 26 - A merger between BATS Global Markets and Direct Edge will unseat the Nasdaq as America’s second largest stock exchange operator by volume. Bobbi Rebell reports.
BATS plans to merge with Direct Edge may be a step in the right direction for the stock trading business- but just a step. The exchange business has been in decline for more than three years. Investors have stayed on the sidelines- worried about the global economy. The impact of this deal on those investors is a toss up. It would make the exchanges more efficient- cutting costs that could be passed on to investors. But it could also create less competition- giving the exchanges some much needed pricing power. Columbia Business School's Charles Jones: SOUNDBITE: CHARLES JONES, PROFESSOR, COLUMBIA BUSINESS SCHOOL (ENGLISH) SAYING: "Either one could happen. Certainly we have very low trading costs in terms of trading stocks in this country right now. The exchange business is such a bad business that it wouldn't be the end of the world if this suddenly made the exchanges just a little bit more profitable but we shouldn't worry. This isn't going to be like an airline merger where suddenly you know economy tickets are going to double in price." That said it will vault the new company to the #2 spot- behind the NYSE Euronext and ahead of the troubled Nasdaq- which just last week suffered a devastating three hour trading freeze. The NYSE Euronext has already agreed to sell itself to the Intercontinental Exchange- putting even more pressure on Nasdaq to find a partner. SOUNDBITE: CHARLES JONES, PROFESSOR, COLUMBIA BUSINESS SCHOOL (ENGLISH) SAYING: "I think that Nasdaq's glitches will probably induce it to make a move of some sort. They know they have to get bigger and I think this event will push them even harder to find a dance partner." Financial terms for the BATS Direct Edge deal were not disclosed. Assuming it gets regulatory approval, the deal would close in the first half of 2014.