Direct Edge
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| Direct Edge | |
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| Founded | 2005 |
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| Headquarters | Jersey City, NJ |
| Key People | William O'Brien, CEO |
| Products | Equities trading |
| DirectEdge | |
| 90324 | |
| Corporate Website | www.directedge.com |
| Releases | Company News |
Direct Edge is a U.S.-based stock exchange operating dual equity trading platforms, EDGX and EDGA. It is owned by a consortium that includes the International Securities Exchange, Knight Capital Group, Inc., Citadel Derivatives Group, The Goldman Sachs Group, and J.P. Morgan. On any given trading day, Direct Edge is ranked as the third or fourth largest stock market in the United States.[1]
The combined markets have a market share in the 10%-12% range. Direct Edge regularly trades 1 billion to 2 billion shares per day, fluctuating with the overall market volume.[2]
Originally launched as an ECN, in March 2010, the SEC approved Direct Edge’s conversion from an ECN to a licensed stock exchange.
Also, in July 2010, the ISE Stock Exchange was decommissioned and both the EDGA and EDGX ECN platforms began operation as independent stock exchanges.[3] The conversion gives Direct Edge the same regulatory status as NYSE Euronext, Nasdaq OMX Group Inc. and Bats Global Markets.[4]
EDGX and EDGA completed their conversion to exchanges on July 19, 2010.
In the wake of the exchange conversion, CEO William O'Brien said an initial public offering for Direct Edge Holdings was possible, in order to compete with other IPOs in the exchange marketplace.[5] O'Brien, in an interview with Bloomberg, said his company is studying, among others, the initial and post-IPO performance for CBOE Holdings, which began trading in mid-June 2010.
Contents |
History
In late October of 2009, DirectEdge introduced a maker-taker fee structure on its EDGA platform from Nov. 1, mirroring the pricing model used by rival venue Nasdaq OMX BX.[6]
The company announced on November 21, 2011 their intention to launch Direct Edge Brazil,[7] an all-electronic trading platform for Brazillian equities that will be headquartered in Rio de Janeiro. The exchange was tentatively scheduled to launch in the fourth quarter of 2012, pending regulatory approval.[8] DirectEdge now expects Direct Edge Brazil will be operational by 2014 after BM&FBovespa completes upgrades to its clearinghouse that would also be used by Direct Edge to clear its trades.[9]
Direct Edge’s integration with dark liquidity provides traders with flexibility to optimize trading for cost, speed, trading partner, market impact, or other factors.
Direct Edge originally quoted on the National Stock Exchange (NSX) when operating as an ECN.[10]
To steer it through the application to the SEC for the two exchange licenses, the company hired Eric Hess, the former chief legal counsel at Brut, another ECN, as its general counsel. [11]
Direct Edge won the 2012 Wall Street Letter (WSL) Institutional Trading Award for Best Overall Exchange Operator. The awards, determined by a panel of independent judges, recognize brokerage firms, exchanges and financial technology companies for achievements and innovation over the past year. [12]
Attain ECN, founded in 1998,[13] was bought by Knight Capital Group in 2005 and re-branded as Direct Edge.[14] In 2007, Knight sold the majority of its stake in Direct Edge.
The privately-owned company merged with the stock exchange arm of the International Securities Exchange in August 2008, retaining its brand and management as well as plans to secure exchange status.[15]
On Dec. 23, 2008, ISE Stock Exchange became a wholly owned subsidiary of Direct Edge Holdings and gained a significant equity stake in Direct Edge.[16]
The firm is now owned by a consortium consisting of Goldman Sachs, Knight Capital, Citadel Securities and the International Securities Exchange, its largest shareholder. JPMorgan also holds a stake.[17]
As part of the spin-off, Direct Edge brought in new management, led by former NASDAQ executive William O'Brien.[18]
Direct Edge filed applications to the Securities and Exchange Commission (SEC) on May 7, 2009 to operate the two stock exchanges. [19] [20]
O'Brien continued to lead the business after the deal with the Eurex-owned ISE, which injected its ISE Stock Exchange unit in a transaction that closed in the fourth quarter of 2008. In July 2010, the ISE Stock Exchange was decommissioned when Direct Edge received exchange status.
Products and Services: Dual Platforms: EDGX and EDGA
One distinction Direct Edge has is its dual platform model.[21] Each platform has its own Market Participant ID and its own pricing schedule. EDGX offers the classic rebate pricing model, giving liquidity suppliers high rebates. EDGA is a free/free model—it is free to take liquidity and free to supply it.
While any subscriber can use either platform, depending upon the order, there are certain kinds of firms that use one platform over the other because of the kind of trading they do. Here is the kind of order flow each platform tends to attract:
EDGX
- Passive black boxes
- Retail limit orders
- Agency Flow
- Agency Algo Flow
EDGA
- Pro-active black boxes
- Retail Market Orders
- Stat Arb Flow
- Active Agency Algo Flow
Key People
- William O'Brien, Chief Executive[22]
- Bryan Harkins, Chief Operating Officer
- Saro Jahani, Chief Information Officer
- Glen Badach, Chief Financial Officer
- Thomas McManus, Chief Compliance and Regulatory Officer
- Anthony Barchetto, Head of Strategy
- Jim Gorman, Head of Corporate Communications
External links
References
- ↑ About DirectEdge. DirectEdge.
- ↑ Direct Edge Plans to Turn Stock Markets into Exchanges in May. Bloomberg.
- ↑ FAQ. Direct Edge.
- ↑ Direct Edge Says IPO Possible After Exchange Status. Bloomberg.
- ↑ Direct Edge Says IPO Possible After Exchange Status. Bloomberg.
- ↑ Press Release. The Trade News.
- ↑ DirectEdgeBrazil. DirectEdge.
- ↑ Direct Edge Brazil FAQ. Direct Edge.
- ↑ Direct Edge Talks With TMX Fizzle. Wall Street Journal.
- ↑ Direct Edge readies bid to become an exchange. Financial News.
- ↑ "Direct Edge Taps Hess". Traders Magazine.
- ↑ Direct Edge named Best Overall Exchange Operator at the 2012 WSL Institutional Trading Awards. MarketWatch.
- ↑ New Home for Direct Edge. Securities Industry News.
- ↑ New Home for Direct Edge. Securities Industry News.
- ↑ ISE Joins Direct Edge to Gain U.S. Share. WSJ.
- ↑ Direct Edge and International Securities Exchange Complete Partnership Transaction. DirectEdge.
- ↑ The New Speed of Money, Reshaping Markets. The New York Times.
- ↑ Knight Capital Lands Citadel Derivatives as Direct Investor in Direct Edge ECN, Seeks to Grow Consortium. Advanced Trading Magazine.
- ↑ Direct Edge: Exchange in 2009. Forbes.com.
- ↑ ECNS Encroaching on Exchange Turf. Traders Magazine.
- ↑ Direct Edge readies bid to become an exchange. Financial News.
- ↑ management. Direct Edge.
