About a week after a "connectivity issue" halted trading on the nation's second-largest stock exchange, two Am Law 100 firms have landed lead roles on a merger of smaller trading platforms seeking to challenge market leaders The Nasdaq OMX Group and NYSE Euronext, the latter the largest stock market in the United States and operator of the New York Stock Exchange.
The New York Times’s DealBook reports
that a combined BATS/Direct Edge will vault past Nasdaq to become the nation’s second-largest stock exchange,
while Bloomberg notes
that the union between the two exchanges comes amid a four-year decline in U.S. trading volume following the 2008–09 financial crisis.
Both BATS and Direct Edge, which are privately owned by consortiums of key players in the financial services industry, utilize high-speed trading technology to keep trading fees low. (In a feature story in
's September issue, noted financial journalist Michael Lewis
explores the increased prevalence of high-speed electronic trading
by examining Goldman Sachs’s effort to break into the lucrative business.)
Stephanie Evans, vice chair of the corporate practice at Wilmer Cutler Pickering Hale and Dorr, is leading a team from the firm advising Direct Edge on its proposed merger with BATS. Direct Edge, whose roots extend to the
1998 launch of an electronic trading network called Attain
, is a longtime Wilmer client. The firm has previously done work for some of the exchange's owners—a group that includes Goldman, JPMorgan Chase, International Securities Exchange Holdings, and high-frequency trading firms Citadel Derivatives Group and KCG Holdings.
, a former Morgan, Lewis & Bockius partner, serves as chief compliance and regulatory officer for Jersey City, New Jersey–based Direct Edge. McManus previously worked as an associate at Orrick, Herrington & Sutcliffe in the late 1990s along with
, the current CEO of Direct Edge, which has been
busy this year expanding into Brazil
BATS, whose owners include Bank of America Merrill Lynch, Citigroup, Credit Suisse, Deutsche Bank, and Morgan Stanley, is being represented by Davis Polk & Wardwell in connection with its effort to acquire Direct Edge. The would-be acquiror’s name stands for Better Alternative Trading System.
Davis Polk corporate partner Leonard Kreynin is leading a team from the firm counseling BATS that includes corporate partner Jean McLoughlin, tax partners Kathleen Ferrell and Neil Barr, financial institutions partner Annette Nazareth, antitrust partners Michael Sohn and Ronan Harty, and associates Andrew Blau, Michael Grossman, and Lee Hochbaum. (Nazareth,
a former SEC commissioner who joined Davis Polk in 2008
, spoke with
sibling publication The Blog of Legal Times earlier this year
about the firm's growing presence in Washington, D.C., and her own work
helping craft the Dodd-Frank Act
Skadden, Arps, Slate, Meagher & Flom corporate finance partners Gregory Fernicola and Phyllis Korff represented underwriters led by Citigroup, Credit Suisse, and Morgan Stanley on the aborted IPO for BATS, which could have generated an estimated $2 million in legal fees and expenses,
according to an SEC filing at the time
U.S. Senate records show
that Bryan Cave and the
Daly Consulting Group
have handled lobbying work for BATS, with Washington, D.C.–based Daly getting $52,500 for its efforts so far this year, and Bryan Cave earning $210,000 since signing on to represent the exchange in January 2012.
For its part, Direct Edge has turned to
Williams & Jensen
to fill its lobbying needs. The Washington, D.C.–based firm has received $540,000 from the company since early 2009 for its advocacy work on market structure issues and implementation of the Dodd-Frank Act,
according to Senate filings
Direct Edge expects its sale to BATS to close by the first quarter of next year, pending the necessary regulatory approvals. The two companies plan to continue running each of the four electronic exchanges they currently operate,
although Reuters reports
they will all shift to BATS's technology platform as a cost-cutting measure.