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March 9, 2009

Direct Edge by a Neck

By Nina Mehta

Direct Edge ECN now routes more flow to NYSE Euronext than Nasdaq does. January was the second month that Direct Edge surpassed Nasdaq's routing volume to the Big Board and its sister markets.

The rise in Direct Edge's routing profile is part of the ECN's growth strategy, said William O'Brien, CEO of Direct Edge. "Routed volume is an asset," O'Brien said. "We've been able to consistently convert that into matched share over time." Direct Edge's January matched market share was 7.9 percent.

Direct Edge overtook Nasdaq as a router in December, when it accounted for 3.7 percent of broker volume on NYSE Euronext's three markets, while Nasdaq was 3.6 percent. In January, Direct Edge had inched up to 4.0 percent, compared with Nasdaq's 3.8 percent.

The change occurred as Nasdaq, the second-largest market for NYSE stocks, pared back some of its routing strategies and Direct Edge's routing efforts won a bigger audience.

Direct Edge is now the sixth-largest NYSE member firm, based on broker volume. NYSE Euronext's biggest brokers are not market centers. Nasdaq Execution Services, Nasdaq's broker-dealer for routing, is number eight. According to O'Brien, his market center sent an average of 144 million shares daily to the NYSE in January, and 101 million shares daily to Arca.

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