Bats Global Markets, the U.S.-based trading platform, is taking over peer Chi-X Europe in a deal aimed at challenging the dominance of national exchanges in share and futures trading.
The deal, valued by sources close to the firms at about $300m, is the latest in a spate of mergers and acquisitions activity in the global market for stock trading.
Bats, which has been in exclusive takeover talks with Chi-X since December, is keen to break the stranglehold of national exchanges like Deutsche Boerse and the London Stock Exchange Group, while they work on similar tie-ups with NYSE Euronext and Canadian group TMX.
Chi-X and Bats, which plan to launch futures trading in the next year, would have a combined European equity market share of 22.9 percent while Deutsche Boerse/ NYSE Euronext would have 29.7 percent and the LSE 23.4 percent, Thomson Reuters data shows.
The firms did not disclose the value of the transaction, which they said is expected to close in the second quarter of this year.
The Bats agreement came amid a flurry of exchange activity. The LSE announced on Feb. 9 exclusive takeover talks with Canadian futures specialist TMX and on Feb.18 a partnership with Asian emerging market the Mongolian Stock Exchange. Meanwhile, Deutsche Boerse agreed a $10.2 billion takeover of NYSE Euronext on Feb. 15.
These deals have put the onus on large global rivals, including exchange group Nasdaq OMX and energy market the IntercontinentalExchange, which are in talks, Fox Business News reported on Feb. 18.
Exchange groups such as LSE, NYSE Euronext, Deutsche Boerse and Nasdaq OMX dominated European share trading until the European Commission's 2007 Markets in Financial Instruments Directive (MIFiD) allowed the emergence of competition.
Chi-X Europe went live that year, making it the first of the alternative platforms, known as multi-lateral trading facilities (MTFs), and it was followed in 2008 by Bats Europe and Turquoise.
But the MTFs struggled to break even, launching in the midst of the financial crisis, and traders began to question their viability as early as 2009. Turquoise was sold to the LSE in February last year.
Bats Global Markets and Chi-X Europe, the most successful of the MTFs with a 16.5 percent market share, are unlisted and owned by groups of investment banks and high-frequency trading firms, of which five are common to both companies.
Joe Ratterman, chief executive of Bats Global Markets, said: "This transaction joins two successful and innovative market centers and will be a tremendous boost for competition in pan-European trading in the face of increasing consolidation among incumbent exchanges."
Deutsche Boerse's takeover of NYSE Euronext faces regulatory scrutiny. European traders are questioning whether the exchanges, which between them account for over 90 percent of European futures trading, will be allowed by the authorities to retain this dominance.
Bats Europe Chief Executive Mark Hemsley said: "The combination of NYSE Euronext Liffe and Deutsche Boerse Eurex has prompted a slew of enquiries from customers about derivatives trading and we will look to roll this out after the integration, which we expect to complete this year."
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