DirectEdge: Major Stock Exchange With A Low Profile
This year’s Wall Street Letter (WSL) Institutional Trading Award for Best Overall Exchange Operator was awarded to Direct Edge. The award, which is decided by an independent team of judges, is given to the brokerage firm, exchange, or financial technology company that best represents innovation and client satisfaction. The company owns EDGX and EDGA, high-volume trading platforms. In March 2010, the Stock Exchange Commission (SEC) approved a conversion of the platforms from electronic communication networks (ECN) to independent stock exchanges, which means their regulatory status is comparable to the New York Stock Exchange and Nasdaq, among others. It is currently the world’s fourth largest equities exchange, and handles ten percent of U.S. daily equity trading.
Any registered broker-dealer who maintains membership in any other registered national securities exchange, or anyone associated with that person, is eligible for both EDGA and EDGX memberships. A different application needs to be filled out for each platform. Prospective members can anticipate contact from member services within forty-eight hours, at which time the next step will be discussed. Upon approval, a trader can connect to the platform or platforms.
Once a trader is connected, he or she has access to a range of products. Both EDGA and EDGX offer the same tape A, B, and C securities. However, each is designed to appeal to different types of order flow, and each has its own fee schedules. Two different liquidity aggregation tools are offered. The Comprehensive Liquidity Check (CLC) allows searches, through non-traditional routes, to find better prices and higher fill rates. MidPoint Match (MPM) is an order type that allows, at minimum, a half cent drift from midpoint on executions over one dollar. Traders can access in depth book feeds, last sale information, and historical data. DirectEdge continually strives to find improved and faster methods so that its members can remain on the cutting edge of their profession.
Designated, as either America’s third or fourth largest stock exchange, Direct Edge, located in Jersey City, N.J., will trade between 1 billion and 2 billion shares each trading day. It has a market share between ten and twelve percent. William O’Brien, company CEO, joined the firm in July 2007. Prior to this appointment, he was Nasdaq’s senior vice president. The company’s motto is “Everyone needs some edge.” With approximately ninety employees, the company handles up to 10,000 orders per second. This major player proves that size is not necessarily needed to become a major player.
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