(Reuters) – BATS Global Markets, the third-largest U.S. stock exchange, is in advanced talks to merge with smaller rival Direct Edge Holdings LLC, the Wall Street Journal reported on Friday, citing sources familiar with the matter.
The report said the deal, which could be announced within days, would create the second-biggest U.S. stock market operator behind the NYSE Euronext in terms of shares traded.
News about the potential deal comes a day after a technical glitch crippled the Nasdaq stock market to a three-hour halt, the latest prominent disruption to the operations of U.S. markets.
The deal would unite two exchanges built by trading firms and banks to challenge the dominance of the New York Stock Exchange and the Nasdaq Stock Market using technology geared toward rapid trading, the Journal said.
Direct Edge, the No. 4 U.S. stock exchange, was looking for buyers last year and had been in talks with TMX Group Inc, the operator of the Toronto Stock Exchange.
The BATS-Direct Edge combination, which would be subject to approval by the Securities and Exchange Commission, would create an exchange operator with about 20.6 percent of the overall market, according to market data from BATS cited in the Journal report.
A BATS spokeswoman said the company does not comment on rumors. There was no immediate response from Direct Edge on the report.