What to make of the BATS and DirectEdge News?

Larry Tabb says this about the news that BATS had received exchange status: it "should send shivers up the spines of existing equity exchange executives." The news that DirectEdge is teaming up with the ISE while it continues to press for exchange status is yet another sign that the ECNs are formidable players in the equity exchange derby. The benefits of exchange status for both are clear: they each would no longer have to quote through other exchanges, they'll be able to better benefit from market data, and they'll get direct access to clearing facilities (which Tabb says could save up to $40 million). So both seem to be big winners in the battle. The losers? Advanced Trading suggests that small exchanges dependent on ECNs for order flow will have a tough time remaining competitive. Indeed, the ISE by aligning with DirectEdge seems to be acknowledging the future.

For more:
- here's Tabb's commentary
- here's the Advanced Trading article

Related Articles:
DirectEdge vs. BATS for dark pool volume
What to make of BATS?