US exchange operators Bats Global Markets and Direct Edge have agreed a merger deal. Financial terms have not been disclosed.
The combined company will form the second biggest US equities exchange - operating under the Bats brand and using its proprietary technology - when the deal closes in the first half of next year, subject to regulatory approval.
Bats CEO Joe Ratterman will remain in the same role and current Direct Edge CEO William O'Brien will be president of the firm, which will be headquartered in Kansas City.
The agreement comes on the heels of IntercontinentalExchange's deal to buy Nyse Euronext, further consolidating a market which has seen falling volumes in recent years.
Launched in 2005, Bats was forced to abandon a planned IPO last year after a humiliating technical breakdown on the opening day of trading. Last week private equity firms Spectrum Equity and TA Associates bought minority stakes in the firm from Lehman Brothers Holdings.
Direct Edge is owned by a consortium including the International Securities Exchange, KCG, Citadel, and Goldman Sachs. Last year it had talks about a possible takeover by Canada's TMX Group.
The pair say that they plan to carry on operating their four US equity exchanges as well the Bats options market and Bats Chi-X Europe. A planned Direct Edge equity market in Brazil will also go ahead.
Says Ratterman: "This agreement is an important milestone for the US equities market and other markets around the globe as it will combine two organisations that have been innovative in creating a more competitive marketplace to benefit all investors."