Electronic market operator Direct Edge Holdings LLC became the newest equity exchange in the U.S. this week, converting its alternative trading platforms EDGX and EDGA to formal exchanges.
The firm, which now joins the likes of NYSE Euronext, Nasdaq OMX and BATS Exchange, received exchange approval from the U.S. Securities and Exchange Commission in March. The firm is housing its data infrastructure at the Equinix Inc. facility located in Secaucus, New Jersey.
“We’re going to start to see a lot of great tangible deliverables on this new platform over the next few weeks and months,” Direct Edge Chief Executive William O’Brien said at a press conference. “With products like the Midpoint Match, with just the improved latency and reliability across the board in our products, I think we have opportunities to grow and we’re going to be able to kick off a whole new round of exchange competition going forward.”
Direct Edge had previously said that it planned to integrate the International Securities Exchange’s Midpoint Match program into its exchange infrastructure with an eye on increased liquidity. The Midpoint Match program is the only exchanged-based dark pool in the U.S. It enables users to trade equities instantaneously at the midpoint price of the national best bid offer.
On Monday, the first full day of exchange operations for Direct Edge, the firm executed 34 million shares, up from a prior daily average that ranged between 5 million and 6 million shares, according to O’Brien. Since becoming Direct Edge’s CEO three years ago, O’Brien said the company has grown from an ambitious start-up with 19 employees with about 1 percent of market share, to a rising contender with 84 employees with “at any time upwards of 12 percent of market share.” In the short-term, O’Brien said Direct Edge will conduct internal testing on its latency rate and that the firm will continue to “fine-tune” the system. The exchange operator also plans to soon begin publishing latency statistics.
“In terms of the mean latency … I think you’ll see us extremely competitive with that of our peers,” O’Brien said. “It’s impossible to do an apples to apples comparison because they may be testing under lower conditions than you are. But everything I’ve seen, at least internally, so far means we’ll be ultracompetitive with respect to the latencies of our system.”
O’Brien also said that he doesn’t expect the landmark finance reform bill signed into law this week by President Barack Obama to “create any kind of broad headwinds for the trading and investing community.”
Headquartered in Jersey City, Direct Edge is owned by a consortium that includes Goldman Sachs, J.P. Morgan, Citadel Derivatives Group, Knight Capital Group, and ISE.