By MICHAEL J. DE LA MERCED and NATHANIEL POPPER
Several weeks ago, William O’Brien, the chief executive of the trading platform Direct Edge, and several of his senior managers flew discreetly to Kansas City, Mo. Waiting for them at the Charles B. Wheeler Downtown Airport there were Joe Ratterman, head of the rival BATS Global Markets, and his team.
After working for months under cover of secrecy — Mr. O’Brien’s company was code-named “Delta,” while Mr. Ratterman’s was “Blue” — the two sides negotiated many of the finer points of a merger. The talks moved so quickly that their meeting finished an hour ahead of schedule.
The fruits of their efforts were on display Monday, as BATS and Direct Edge announced their plans to combine under the BATS name in an all-stock deal. The goal: to displace the New York Stock Exchange and the Nasdaq atop the world of stock markets. Combining the two will vault the new company past Nasdaq to become the second-largest exchange operator in the United States.
“It pretty much guarantees you’re going to have a significant force to be reckoned with in the global exchange place for decades to come,” Mr. O’Brien said by phone.
The deal, the terms of which were not disclosed, is the latest in the world of market operators, as companies seek more efficiencies and broader global reach by combining. Last year, the IntercontinentalExchange agreed to buy the N.Y.S.E.’s parent, NYSE Euronext, for $8.2 billion. Also last year, the parent of the Hong Kong Stock Exchange paid more than $2 billion to buy the 136-year-old London Metal Exchange.
The pressure to join forces is a result of the challenges and changing environment facing exchanges. Technological advances and regulations have encouraged competition between markets, driving down the profitability of the Big Board and Nasdaq….