Direct Edge is a stock exchange that operates two separate platforms, EDGA Exchange and EDGX Exchange. The exchange trades all listed U.S. equities, including Tape A (NYSE listed), Tape B (Arca/Amex listed) and Tape C (NASDAQ listed) stocks.
Direct Edge originated as Attain ECN in 1998. The company was subsequently purchased by Knight Capital Group in 2005 and introduced as Direct Edge ECN. Knight spun Direct Edge off as an independent company in 2007. During the following year, Direct Edge increased its market share to capture 6% of all U.S. equity execution volume.
In a deal announced in August of 2008, the International Securities Exchange (ISE) took a 31.5% stake in Direct Edge, and Direct Edge took operational control of the ISE Stock Exchange. In 2010, upon approval from the SEC, Direct Edge’s ECN platforms were converted into licensed stock exchanges, transitioning Direct Edge to full exchange status, while the ISE Stock Exchange, EDGA and EDGX ECNs were decommissioned.
Direct Edge pioneered the bifurcated market structure, operating two platforms as opposed to one, and the integration of dark and displayed liquidity. The dual platform model aids Direct Edge in catering to different customer bases. Both platforms offer identical securities for trading, but employ independent fee schedules and attract different types of order flow.
Another Direct Edge distinction is its innovative role as the first displayed market center to facilitate dark liquidity participation in its market. Direct Edge launched an Enhanced Liquidity Provider (ELP) Program in 2006, which provides subscribers access to multiple sources of displayed and dark liquidity. Direct Edge also offers unique order types and routing strategies designed to accommodate its members’ investing requirements.
Direct Edge accepts Market, Limit, Immediate or Cancel, Reserve and Extended Hour Orders, which can be executed at the limit price or better. Orders are executed on a price-time priority basis. All internally matched and routed trades are delivered to NSCC for clearance and settlement.
The exchange provides information regarding rebates and charges for adding, removing or routing liquidity per share for Tape A, B and C securities on its website, with separate fee schedules for EDGA and EDGX.
